What Steps Can Californians Take to Avoid the Lengthy and Costly Probate Process?

What Is Probate?

Probate is a legal process through which the assets of someone who has passed away (known as the decedent) are distributed to the heirs. Under California law, probate is required if someone dies without a will and has an estate worth more than $184,500 (that figure can change with time). It’s also required for decedents who had a will with property that is subject to probate. Because probate is a process that goes through the courts, it can take time and cost significant sums of money, two things the heirs would likely prefer not to use. It’s vital to understand that there are exemptions to what’s required to go through probate and methods of estate planning that can help bypass it.

What Is Exempt from Probate in California?

California law specifies several assets that are considered non-probate property, including the following.

• Assets below the current value threshold of $184,500.
• Assets owned jointly by spouses and designated as “community property with right of survivorship.”
• Assets owned jointly by the decedent and another person (as long as the decedent passes away before the other person).
• Any assets (such as bank accounts and life insurance policies) that list a beneficiary as payable on death (POD) or transfer on death (TOD).
• Assets held in the decedent’s living trust (more on this below).

What Is Usually Subject to Probate in California?

Generally, any property owned solely by the decedent (including items listed above) that was not transferred to a trust or designated as a POD or TOD. This can also include jewelry, artwork, and intellectual property.

One area that will have to go through probate regardless is assigning a guardian to a minor child orphaned by the decedent’s death. If there’s a will that specifies who should be the guardian, that will need to be approved by probate. If there is no will or the will doesn’t name a guardian, the probate court is responsible for designating one.

What Is a Revocable Living Trust, and How Does it Help Avoid Probate?

A revocable living trust is an estate planning tool that allows the estate’s owner to place assets into the trust’s ownership. The trust is managed by a trustee, which can be the estate’s owner or someone else of their choice. The estate’s owner can change or revoke the trust at any time in their life, as long as they’re deemed mentally competent.

The trust dictates who the beneficiaries will be once the estate’s owner passes away. This may sound similar to drawing up a will, but a will often ends up in probate, while a trust bypasses it altogether. This allows the distribution of the trust’s assets to be settled more quickly and at a significant savings and lower cost than going through probate court.

What Is Required to Set up a Revocable Living Trust?

This type of trust requires a creator (also known as a grantor), which is the person who puts their estate assets into the trust. It requires a trustee to manage the trust assets, and it requires that a beneficiary or beneficiaries be named to inherit the trust’s assets on the grantor’s death.

It’s important to know that the trustee is not allowed to manage the assets in the trust for their own personal benefit. They must manage the assets in the beneficiaries’ best interests.

Often, people assume trusts offer tax benefits. Some may, but revocable living trusts usually do not.
It’s also important to understand that this type of trust does not provide asset protection. That means the assets in the trust could be subject to claims from creditors. If this is a potential concern for your estate, it’s highly recommended that you work with an experienced asset protection attorney to tailor your estate plan with that in mind.

Are There Other Types of Trusts That Help Avoid Probate?

There are several with varying restrictions and goals. These are two popular choices.

• Irrevocable living trust. This is essentially a living trust that, once it’s finalized, cannot be changed. The grantor cannot change or revoke it. It’s exceedingly rare that legal exceptions are made once the assets are moved into the trust’s ownership. However, it has some benefits that the revocable living trust doesn’t. It may have tax benefits for the inheritors, and it’s not subject to creditors’ claims. For that reason, it’s also a valuable option for someone whose career might make them more prone to lawsuits.
• Special needs trust. If there’s a family member with special needs, the grantor can set up a trust that will provide assets managed by a trustee on behalf of the special needs person. This is especially useful if the beneficiary is unable to manage their own finances. It’s also valuable in that assets in this type of trust aren’t considered to be under the beneficiary’s control. Then, the beneficiary can remain eligible for various government benefits, including Social Security or Medicaid, as the assets won’t be taken into account when determining their need and eligibility.

What Should I Do if I Need Help Setting Up an Estate Plan that Can Avoid Probate as Much as Possible?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Our team of knowledgeable, experienced estate planning attorneys knows that you want to do everything possible to transfer your estate to your designated heirs in the easiest way possible while avoiding unnecessary public exposure. We can walk you through the specifics of your estate and explain the various options available that can help reduce the need for probate.