Ways to Avoid Probate

by Vincent Davis on January 9, 2014

While many people are not sure of what probate is, many assume correctly that it is something that should be avoided under most circumstances.   Probate is the process by which a deceased person’s estate is transferred to the decedent’s beneficiaries.   Probate can be and usually is both an expensive and a time-consuming process.     California attorneys’ fees are set by statute for probate and those fees are based on the market value of the estate, regardless of whether there is a significant mortgage on the property.   As such, a $500,000 estate can result in statutory fees of $26,000.  Attorneys can also see extraordinary fees which have to be approved by the probate court.   The second issue is time.   A typical probate can take eight months to a year to complete, and a probate can take several years if the estate is complicated or if the proceedings become contentious.

It is not enough to have a will in order to avoid probate.    That will still needs to be filed in the local probate court where the court will supervise the orderly transfer of assets.   The probate court will assist in the inventorying of the deceased person’s assets and will supervise the notification of creditors.   The remaining assets are distributed to the beneficiaries, once all debts and taxes are paid.  In the event there is no will, then the assets are distributed according to state law, through intestate succession.  Basically, when an individual does not provide for how his assets are to be distributed to family members, the state sets out how those assets are to be distributed, and this can be contrary to the intentions of the individual.

Fortunately, several strategies exist to avoid the probate process.   One of the more common methods is the drafting of a revocable or living trust.   A revocable trust is a legal document that controls the transfer of any and all property that the individual has placed in the trust.   A trust is very similar to a will in that both are use to distribute assets to beneficiaries that you select.  However, a trust, unlike a will, is not normally made public after the death of the individual.   A revocable trust can be used for additional reasons as well, such as to avoid or defer estate taxes, but for the majority of individuals, the biggest advantage of a revocable trust is simply to avoid probate.

There are other common methods to avoid the probate process, however.   One of the simplest probate-avoidance methods is to hold real property in joint tenancy.   The primary element of joint tenancy is that the surviving owner of a property held in joint tenancy automatically inherits the property share held by the deceased owner.   However, the putting of property in joint tenancy can have important gift and other tax consequences.

When dealing with very specific assets such as bank accounts or stocks, an individual can use Pay-on-death designations to avoid probate.    Basically, you name a beneficiary for that asset and your beneficiary quickly receives those assets with no probate.   The upside is that these pay-on-death designations can be easily set up and there is usually no additional cost, but you do not want to set these up when it’s possible that the beneficiaries will still be minors at the time that they inherit.  In that instance, it’s better to have a revocable trust drafted.   That way the funds can be held “in trust” until the minors reach a certain age, usually the age of eighteen.

Even in the event that an individual does not have a revocable trust or other similar probate-avoidance method, the state of California does have two simplified probate procedures.    The first is the spousal or community property petition.   By this method, a surviving spouse can more easily obtain the portion of the deceased spouses’ property that was left to him or her.   A simplified probate form needs to be filed with the court, but the process is much quicker than a full probate.  Also, the advantage of this method is that there is no dollar limit on how much property can be transferred by this method.

A second method in California allows the transfer of personal property worth less than $100,000 by affidavit.   The purpose of this affidavit procedure is to allow beneficiaries of a decedent with a relatively small estate to inherit and obtain the cash and other assets without having to incur the time and expense of a full-blown probate.   Basically, the beneficiary or beneficiaries must sign a simple form called the “Affidavit for Collection of Personal Property” and present it to the individual or entity that is in possession of the assets.   The people or organizations holding the property must then promptly release the assets to the beneficiaries.

In conclusion, it is clear that probate is a process that is best avoided in most instances.  Fortunately, there are methods to avoid probate.   It is best to consult an attorney to discuss which method is the most appropriate for you.

By: Vincent W Davis
The Law Offices Of Vincent W Davis And Associates

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