For some clients, their primary goal in estate planning is to find a way to avoid probate court. Though that is true, most people are not really sure how to go about doing it. While estate planning can accomplish that goal, if you so choose, there are alternatives to probate Sacramento residents should be aware of so they can decide which methods to choose.
First, what is involved in probate and why it may be necessary
Probate is essentially an organized way to transfer ownership of property to specific beneficiaries. However, probate is the method of last resort, so to speak, after all other assets have been transferred by trust or other method. The process is controlled and managed by the probate court, which requires the entry of a final order of distribution.
Four methods for avoiding probate
There are essentially four ways to transfer ownership of your estate property without probate in California. Those four methods include transfer by operation of law, by contract, through a trust and through summary probate. When these methods are done properly, with the help of an experienced and qualified estate planning attorney, you can avoid the expensive and time-consuming process of probate.
Transferring property by operation of law
Certain California statutes determine who owns the funds that remain in a bank account after the bank account holder has died. Under these rules, the decedent’s share of the funds will pass according to the terms of the contract the account holder has with the bank. They could also pass by operation of law to certain survivors. All that is required is presenting the death certificate to the bank and a new account will be opened in the name of the survivor. As such, probate is not required.
Transferring property by right of survivorship
If two people hold title to a piece of property in “joint tenancy,” that means they have designated themselves as have full ownership of that property upon the death of the other. This is also referred to as the “right of survivorship.” Spouses in California can hold property as community property with right of survivorship, as well. However, unlike joint tenancy, community property that does not specifically designate it as “right of survivorship,” will not pass through survivorship. Instead, the distribution of the property is controlled by the decedent’s will. The right of survivorship applies to both real and personal property, but it does not apply to bank accounts, which are governed instead by a separate law.
Transfer of property by designation of beneficiary
California also has a statute that governs transfers of property by beneficiary designation. The most common types of beneficiary designation transfers we are all familiar with, and those are life insurance policies, annuities and retirement accounts. Upon the death of the insured, the owner or the employee, the money held in these types of accounts will be distributed to the person designated as beneficiary. These rules also apply to Transfer on Death (TOD) and Pay on Death (POD) securities. Caution is required in using these designations.
Transferring assets by trust agreement
Any assets being held in trust can be transferred after your death without going through the probate process. Under a trust agreement, your property will first be transferred to the name of the trust in order to fund the trust. Then the property will ultimately be transferred to the named beneficiaries after your death. Your trustee is the person you select to manage the property until that time. A trust-based plan is often the best planning option for most people who have more than a very modest estate.
Summary probate procedure in California
The California Probate Code provides for summary probate procedures, which is an abbreviated process. The terms of the decedent’s will are followed to distribute the assets, without the need for a full probate proceeding. This can be a cheaper and quicker option.
However, in order to be eligible for the summary probate procedure, your estate must include either personal property not exceeding $150,000 in aggregate value, real estate of less than $150,000, or the assets pass directly to the surviving spouse.
Download our FREE estate planning checklist today! If you have questions regarding probate, or any other estate planning issues, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.