Avoiding probate in California is possible. Some estates can avoid probate because they are small in value and there are very little assets to administer. Other estates can avoid probate in California because of proper pre-death planning that avoids the necessity of probate. Having a solid estate plan is certainly the best way to avoid probate, but what happens if that was not done? Read on to learn how to avoid probate in California.
When Do You Need to Go to Probate?
Knowing whether probate is necessary will save you time and money. California has several probate procedures available to settle an estate. Determining whether probate is necessary and which probate procedure can be used will depend on three key components:
- the type of property the decedent owned,
- the value of that property, and
- how title to the property was held.
In addition to distributing an estate to the proper beneficiaries or heirs, the probate process is also used to clarify any issues or contradictions within a will. Probate can also resolve challenges to the distribution of the estate’s assets. For the purpose of this article, “probate” refers to a full probate and not one of the alternate small estate proceedings that could be used to settle smaller estates. Below are common reasons for an estate to be probated.
- When no will exists. Estates must be probated if the decedent did not execute a will and the estate has assets requiring probate that are valued in excess of $150,000. Probating the estate will determine the beneficiaries and the assets they will receive.
- When a valid will exists. An estate will have to be probated if a valid will exists and the estate has assets requiring probate that are valued over $150,000. Probating the estate will validate a will and distribute the estate’s assets according to the terms of the will.
- There are mistakes in the will. The will must go through probate if mistakes are present. For instance, a fraudulently executed will can be challenged.
Do All Estates Need To Be Probated?
An estate must go through a full probate process if property ownership will be transferred and the decedent has an estate consisting of highly valued assets. For example, the probate of an estate will be required if the decedent owned property as a tenant-in-common if the value of decedent’s interest is over $150,000. Probate may also be necessary when beneficiaries have predeceased the decedent, or when the distribution of the estate’s assets are being challenged. There are alternative probate processes in California that can be utilized to settle small estates under $150,000. Please refer to our website that reviews other probate procedures that can be used to settle a small estate in California and when these other procedures can be used.
Assets Subject to Probate
Property held as tenants-in-common is subject to probate upon the death of one of the owners; that is, property that is in a decedent’s name and the name of at least one other person. Holding title in tenants-in-common is different than holding title in joint tenancy or community property with right of survivorship, and the outcome upon death does not automatically transfer to the surviving owners. Examples of tenants-in-common property include bank accounts , investment accounts, stocks, bonds, vehicles, boats, planes, real estate, and business interest. If two or more people are listed as having ownership of these types of assets, but there is no designation of the type of ownership, ownership is assumed to be equally split between the people on title. When more than one person’s name is on title to an asset, it is assumed, by default, to be owned as tenants-in-common unless there is designation to the contrary.
Example: Real property held in the name of “Joe Smith, an unmarried man, and Sara Jones, an unmarried woman” would be considered to be owned 50% by Joe and 50% by Sara, as tenants-in-common, with no right of survivorship. On the other hand, if title was “Joe Smith, an unmarried man, and Sara Jones, an unmarried woman, as joint tenants,” if either Joe or Sara died, the remaining owner could easily transfer the deceased owner’s share of the property to the surviving owner without probate.
Revocable living trusts, pay-on-death accounts and registrations, and gifts are not subject to probate.
Does Every Will Go Through Probate?
Not all wills have to go through the full probate process in California. California probate law provides several different probate processes (court and non-court) to settle and distribute the assets of a decedent’s estate. Full probate is required for large complex estates valued over $150,000. Smaller estates may be able to use some of the alternative procedures available under California probate law. All wills, however, are required to be admitted with the local court, meaning the original Will is lodged with the Court for safe-keeping, whether or not a court probate process is filed. Probate Code Section 8200(a) provides, in part:
Unless a petition for probate of the will is earlier filed, the custodian of a will shall, within 30 days after having knowledge of the death of the testator, do both of the following: (1) Deliver the will to the clerk of the superior court of the county in which the estate of the decedent may be administered and (2) Mail a copy of the will to the person named in the will as executor, if the person’s whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person’ s whereabouts is known to the custodian.
Some beneficiaries or other claimants of the estate may choose to open a probate case to give notice, make claims, or address any debts or existing credit claims.
How to Avoid Probate in California
Avoiding the probate process is possible. The most simple way to avoid probate is to make sure you plan for the future and create a living trust before you die. A living trust will place your assets and property “in trust” which will be managed by a trustee for the benefit of beneficiaries. As Trustee of your Trust, you will keep all rights and ownership of the property during your lifetime. The Trust will define how you want your property distributed upon your death. When property is in a Trust, the assets can be easily distributed to the beneficiaries without having to be probated. This is because property held in certain trusts avoids the probate process and estate taxes.
Probate can also be avoided if pay-on-death beneficiaries are named on retirement and bank accounts. The probate of real property can be avoided if it is held as joint tenancy with a right of survivorship or if a transfer-on-death beneficiary is designated on California’s new Transfer on Death deed. It should be noted, however, that holding title to an asset in this manner does not dismiss the importance of proper additional pre-death planning nor necessarily eliminate the need of a living trust.
How to Avoid Estate Taxes
Many people will not need to be concerned about estate tax liabilities. Only the wealthiest estates are required to pay estate tax because the estate tax is assessed only on the portion of an estate’s total value that exceeds a specified exemption level As of 2015, the lifetime gift and estate tax exclusions is $5,430,000. Married couples can transfer a large amount of assets ($10.86 million in 2015) without owing federal gift or estate tax. For very large estates, there are tax avoidance actions that can be used to cut the potential estate tax liability. These actions include maximizing gifting during lifetime or setting up a charitable trust. You should consult with an attorney to discuss more complex pre-death planning if your estate is expected to be valued over $10.86 million dollars.
Going through probate can be an arduous task for the surviving heirs and beneficiaries. Contact A People’s Choice for more information about how to avoid probate in California. Call us at 800-2747-2780. Our experienced staff is available by phone to answer your questions.