Avoiding probate is a major estate planning objective of many California individuals and families. Probate is the legal court process necessary to recognize a person’s death, and administer their estate according to the terms of their will, or according to the laws of intestate succession of their was no will.
The probate process in California can be lengthy and expensive for those who have a will, and even more so for those without one. For example, the median value of a Bay Area home in January of 2019 (as supported by this article in the San Francisco Chronicle) was $730,000. The cost to transfer that home through the probate process can easily cost over $35,000 in attorney and executor fees, regardless of whether there is a mortgage on the property. For San Francisco, where the median price in January 2019 was $1,150,000, it can cost over $52,000 (again, even if mortgaged up to its eyeballs). Lower priced homes are costly as well, the cost to probate a $400,000 house can be well over $22,000. And that’s just for the house. Throw in the value of personal property such as furniture and automobiles, bank accounts and investments in a deceased person’s name, and all those numbers will increase, possibly considerably.
Then there is the time factor. A probate in California will take anywhere from 6 months (best case scenario) to up to 2 years or more.
The above gives you an idea of why avoiding probate in California is so important. The balance of this article describes ways to avoid probate. Probate can be avoided by taking some simple steps while you are alive to spare your family the hassle. It’s best to confer with a qualified estate planning attorney to review your personal situation and determine the best combination of strategies.
Assets that may not be subject to probate:
Certain assets may not have to be distributed through probate and are transferred directly to the beneficiary who is named following a death (if there is a named beneficiary that is – otherwise they will potentially be subject to probate). These non-probate estate assets include the following:
Life Insurance death benefits
401(k) accounts
IRAs
Annuities
Trust assets
Money in Transfer on Death (TOD) or Payable on Death (POD) accounts
Property owned in joint tenancy with a right of survivorship (but only at the first owner’s death)
Using Living Trusts to Avoid Probate:
You can form a revocable living trust to avoid probate for virtually any asset you own, including but not limited to real estate, bank accounts, stocks and bonds, business interests and vehicles. In order for a living trust to be effective, the title of the assets in the trust must be changed from your individual name into the name of the trust. Because the trust is created during your life, the living trust is a twofold plan. It directs the administration of assets during your lifetime and it directs the disposition of your estate at the time of your death, allowing the trust beneficiaries to receive the assets without probate court proceedings.
To learn more about living trusts, read this article by the author: Should I Have a Trust?
Avoiding probate by taking responsibility for the transfer of your assets is easily accomplished by working with a qualified estate planning attorney. The money you spend will be a drop in the bucket compared to the costs saved down the line in attorney’s fees and possibly in estate and/or income taxes as well.