There are many ways that assets can be handled to achieve the objective of a probate free world for your intended beneficiaries after your death. A living trust is the best mechanism to avoid probate in California. Our estate attorney can help you avoid probate in California.
Yes, the living trust is the most flexible and protective estate planning device available to have assets pass upon your death without probate. A properly drafted living trust customized to your needs will function to avoid probate. There are pervasive benefits to having an asset pass by way of trust to your chosen beneficiaries. To set this up contact Iron Clad Living Trust Estate Attorney at (951) 691-8897.
Many people do not realize that probate can be avoided. The easy way is to identify someone as your “Pay-On-Death” or “Transfer-Upon-Death” beneficiary on a bank or investment account. Any banking institution will permit you to do so on any checking or savings account. You are not making the other person a joint owner or user of the account. You are making them a beneficiary of the account upon your death. For investment accounts, you can contact your brokerage and inquire into designating someone as a beneficiary upon your death. Many benefits that a trust could provide are lost. If the beneficiary is still living, then the asset will pass without probate.
California has in place a “small estates” law for estates valued under $150,000. Small estates almost always involve financial assets and not real property. The “small estates” law is very powerful. If an estate qualifies for small estate status, an asset of the estate lacking a beneficiary can actually be transferred by way of an affidavit procedure. This helps avoid probate of the estate. The downside is that since the deceased did not designate a beneficiary while they were living, the asset will pass according to the statute. The order of priority in that statute may not be consistent with how the deceased truly wanted the asset to pass. An estate probate lawyer should handle this procedure, which can be accomplished without court intervention.
An interesting wrinkle to a living trust is that it can be named the beneficiary of an asset, such as life insurance proceeds. The trust will provide much greater protection and flexibility for any asset (such as life insurance monies) paid to it as a beneficiary.
Real property is more complex for probate. There are ways to avoid probate without the preferred vehicle of a living trust. For example, a married couple holding title to the property in California as real property with right of survivorship will allow that asset to escape probate upon the death of one spouse. However, the pitfalls of the lack of a living trust are still present. For example, if the husband and wife died simultaneously, the property would need to go through probate.
Another pitfall is that the surviving spouse can avoid passage of the asset to their children and add a new partner or spouse on the title to the property. Thus, the property has escaped the next generation of the original couple listed on the deed.
California also has a recent law in place, allowing for the transfer of real property by way of what is known as a revocable transfer on death deed. This law only took effect in 2016 and expires after 2020. The law does have its intricacies and limitations. A knowledgeable attorney should be consulted before undertaking any deed transfer. The danger of deeds is that the internet has made it seem an easy task. Often these options do not disclose the permanent, negative consequences which can result from the transfer of interests in real property.
Another probate avoidance mechanism is achieved by adding a person to the title to your home. There are numerous limitations and downsides to this option. There could be tax consequences both before and after your death. An existing mortgage could be adversely affected, and a new one difficult to obtain. The property could be at greater risk of liability since it is now also subject to creditors of the person newly added to the title.
Assets such as bank accounts can have one or more users, often known as multiple party accounts. For a two-party account, the death of one party will shift sole ownership of the account to the survivor. As with any other estate planning device, the pros and cons of using a jointly owned account or one with multiple parties thereon should be carefully considered.
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