Are you wondering how you can avoid probate in California with a will? That’s a tricky question, and we’re going to look at it in this blog post. Probate is very expensive in California, and there are ways to minimize its role or avoid it completely. But a will is not the tool to do it.
Can You Write Your Will To Avoid Probate?
If you want to make sure to avoid (or at least minimize) probate in California, you need to do some diligent planning that has to go far beyond writing your will.
That’s because if your estate, with certain exceptions, is larger than $184,500, wills do have to go through probate. However, it depends on the nature of your assets and how they are passed on. If you do this correctly, you’ll be able to avoid probate either entirely or for most of your assets.
Why Would You Want to Avoid Probate?
There are really three major reasons why you might want to avoid probate. The first one is the cost of probate. Probate attorney fees and personal representative fees are a fixed percentage of the gross value of your assets which decrease in increments with the size of the estate. In all, it can be quite a substantial amount.
The worst part is that often there are taxes or debts that have to be paid from the gross amount, leaving the beneficiaries with much less than the amount they were assessed the probate fees on. Let’s say that they are charged a probate fee on $600,000 worth of assets, which would come to around $15,000. But after paying taxes and debts, they may only get $150,000, which means that the probate fee amounts to 10% of the entire inheritance. That’s a lot!
The probate process can also take quite a bit of time. Exactly how much time it will take can vary, but in many instances it can take a year or more, plus a lot of work including filling out forms and going to court. And naturally, the heirs want their money or other assets as soon as possible, so avoiding probate is important to them.
Finally, the probate process will make the will with all its information a public record. If you feel strongly about keeping your affairs private, you may want to take advantage of whatever other options you have available to avoid making your personal information public..
Does Everything You Own Have to Go Through Probate?
Not all assets you own have to go through probate. There are quite a few exceptions. In fact, that’s where shared assets and trusts come in.
Shared Assets
If an asset, for example a home, a car, or a bank account, is co-owned with another person or persons as joint tenants, then that asset goes automatically to the other owner or owners if one of the owners dies. This means that co-owned assets go directly to their beneficiaries instead of having to go through probate.
In fact, even if a car is not currently a shared asset, you can indicate on your registration to whom it should go after your death. That way, it will automatically be transferred to the beneficiary and will not be part of probate.
The same is true for assets such as life insurance or retirement plans, including 401(k)s, where the beneficiaries are listed by name. Those assets will also automatically be transferred to the named beneficiaries without having to go through probate. Bank accounts also can have their beneficiaries listed and thus avoid the probate process. But relying on these transfer on death (TOD) provisions alone to avoid probate can be hazardous, and can lead to many unintended consequences.
How Trusts Can Help You Avoid Probate
Trusts are the most important tool to avoid probate. Assets that are part of a trust are not included in probate. For most people, the best option is a living trust.
During your lifetime, you can transfer your assets into a living trust. At that time, you are generally the trustee, and you need to indicate who will take over as the trustee after you die. That person is called the successor trustee and will distribute your assets according to your wishes without probate court proceedings after your death.
While you’re alive, you can also revise and make any changes you want to your living trust, so if you change your mind about who should get what, you can adjust that.
While you’re listing your assets, don’t forget the “little” stuff. That could include furniture, household items, jewelry, clothing, and so on. The more of these don’t get included, the bigger the left-over amount will be.
If you have a comprehensive living trust, you technically don’t need a will. However, most attorneys would recommend setting up a so-called pour-over will. That would include anything that has accidentally been left out of your trust, or has been added after the last revision. It can also contain things like the designation of a guardian to take care of minor children.
That makes it especially important to add everything you can into your trust, down to the household items and review your trust regularly. As a result, there will not be much value in your pour-over will, and therefore, it will likely qualify for a streamlined probate process or may not need probate at all.
You should also create a power of attorney for financial matters and an advance health care directive (“living will”) to help you in the event you should become incapacitated.
What You Should Do Now
In answer to the question whether your will can avoid probate, the answer is no, unless you have a very comprehensive living trust and have done your due diligence when it comes to transferring all your other assets into shared assets and indicating a beneficiary for the rest.
To make sure you’re covered, you should definitely talk to a qualified estate and probate attorney. Call us for a free consultation, and we’ll be glad to talk to you. After going over your assets and situation, we’ll be able to help you achieve your goals.
