Probate is often unavoidable when settling an estate upon one’s death. However, it can be very time-consuming and expensive, so most people want to avoid it. Probate involves court oversight to validate a will and distribute assets. This can delay access to inheritance and impose additional expenses. Fortunately, California allows several probate avoidance strategies in which the transfer of assets becomes far easier for beneficiaries. Here are some of the best ways of avoiding probate in California.
Utilizing Small Estate Exemption Available Under California Law
California does allow a simplified process in order to avoid probate when the estates are small. According to this exemption, estates valued under $166,250 may qualify for a simplified probate process or avoid probate in California. This procedure is applicable to personal property, such as bank accounts or vehicles, but not real estate. Heirs can claim the assets through an affidavit procedure without court intervention. They have to fill out a form stating their legal right to inherit and attach supporting documentation. This approach saves both time and money, making it an excellent option for smaller estates.
Establishing a Revocable Living Trust
The living trust is, probably, one of the more widely used instruments to prevent the probate of assets after the death of any owner. Within this, during your lifetime you transfer all ownerships into the name of your trust, of which you are considered trustee. After your death, all assets shall be transferred by your successor trustee pursuant to your written instructions and with complete avoidance of the probate process altogether. It not only speeds up the distribution process, but it keeps your financial affairs private as well. Unlike probate, a living trust is in private, while probate is a public proceeding. Moreover, you have flexibility since you can modify the terms of the trust or add to the assets in your lifetime.
Naming Beneficiaries on Financial Accounts
You can name beneficiaries on certain financial accounts such as life insurance policies, retirement accounts, and payable-on-death (POD) accounts. At the owner’s death, funds transfer directly to beneficiaries named on the account, bypassing probate. This approach is easy but requires some maintenance because you should periodically review beneficiary designations to make sure your beneficiary choices accurately reflect your current wishes. For example, you should review and revise your designations if you get married, divorced, or have a child.
Using Joint Ownership with Right of Survivorship
Another effective way to avoid probate for certain types of property, like real estate and bank accounts, is by using joint ownership. When the property is held as joint ownership with the right of survivorship, the decedent’s ownership automatically passes to the surviving co-owner upon the death of an owner. This is often used between spouses to provide for easy, automatic transfer of property. Joint ownership is not ideal in every situation, particularly when there are multiple heirs. It is always best to consult with an estate planning attorney to determine if this is the best approach for your needs.
Gifting Assets During Your Lifetime
Another way to avoid probate is by gifting your beneficiaries with any assets while still alive. Here is a list of what you may transfer to loved ones in advance and thus remove these from your estate:
- Property
- Cash
- Gold
- Documents
- Other valuables
Although gifting is one powerful estate planning tool, the potential tax implications and the question of how such transfer fits with your overall financial goals may need to be weighed carefully. An attorney or financial planner can help in structuring an effective gifting strategy.