Probate is a legal process which transfer legal title of property from the decedent to his/her beneficiaries. As described in the “Why Estate Planning Makes Sense”, probate may take one year or more to resolve, and might cost 4% to 10% or more of the total value of the estate. The probate is rarely beneficial to the heirs.
To avoid probate, remember there are three ways to avoid the probate: Trust; Beneficiary Designation; and Joint Ownership.
The first vehicle: Trust. Assets held in trust will avoid the probate process. Irrevocable, revocable (living) does not matter. The trustee will transfer the trust property to the designated beneficiary according to the trust document. Note that a will which pour-over the assets to the trust, “Pour-over Will”, does not qualify for non-probate since it is still a will. Please also keep in mind that the assets must be properly transferred to the trust by changing the title of the assets. Otherwise the assets are not deemed as “trust property” and they have to go through the probate process even though the trust document was created. Many people tend to forget to change the title.
The second vehicle: Beneficiary Designation. This category includes Payable on Death (“P.O.D.”) designation such as bank accounts and other financial accounts, and Transfer on Death (“T.O.D.”) on stocks, bonds, and other securities. Life insurance and IRA benefits, in which the beneficiaries are named, would belong to this category. Even the real estate can be in this group by making T.O.D. Deed if the beneficiaries are properly designated.
The third vehicle: Joint Ownership. Joint tenancy and community property with the right of survivorship will avoid the probate process. You could have joint ownership with the right of survivorship with someone who does not have to be your spouse. Since California is one of the community property states, community property may also allow you to transfer the property without the probate, provided that the property is held in title with “the right of survivorship”. If there is no indication of the right of survivorship, the property still must go through full probate unless the surviving spouses file a special petition which allows the surviving spouses to acquire title by simplified process under California Probate Code Section 13500.
In addition to the above planning vehicles, California Probate Code Section 13050 provides that the probate administration is not necessary if the total value of the assets, which are subject to the probate, does not exceed the sum amount of $150,000. This is called “Small Estate”. In this calculation, you do not need to count the value of the assets which are not subject to the probate such as property in the trust, under joint ownership, or P.O.D. accounts. There must simply be a signed affidavit declaring the number of properties at the time of death and no court involvement is needed. But remember if you have real estates, this special summary process is not for you even if the total value of assets is below $150,000.
Then you may realize that by combining the above techniques, proper planning would completely avoid the probate and save your beneficiaries’ time and money. Please search information online and if you have any questions, the attorney may help you.
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