Which assets bypass probate and why is this advantageous?

What Assets Bypass Probate in California?

In California, certain assets bypass the probate process. These include joint tenancy properties, retirement accounts, life insurance policies, and assets held in a living trust.

Joint tenancy properties are those owned by two or more people. When one of the owners dies, the property automatically passes to the surviving owner(s), bypassing probate. For example, if you and your spouse own your home as joint tenants, the house would not have to go through probate when one of you passes away.

Retirement accounts like IRAs and 401(k)s typically have designated beneficiaries. Upon the account holder’s death, these assets go directly to the named beneficiaries, avoiding probate. Similarly, life insurance policies also pass directly to the beneficiaries, bypassing probate.

Assets held in a living trust, a legal entity you create to hold your assets, also avoid probate. Upon your death, the trustee you’ve appointed distributes the trust’s assets according to your instructions.

Why is Bypassing Probate Advantageous?

Bypassing probate can be advantageous for several reasons. Firstly, probate can be a lengthy process, often taking months or even years to complete. This can delay the distribution of assets to your heirs.

Secondly, probate can be expensive. In California, probate fees are set by law and can be quite high, especially for larger estates. These fees are paid out of the estate itself, reducing the amount left for your heirs.

Lastly, probate is a public process. This means that the details of your estate, including its value and who you’ve left your assets to, become part of the public record. Many people prefer to keep these details private, which can be achieved by bypassing probate.

How Can I Ensure My Assets Bypass Probate?

There are several strategies you can use to ensure your assets bypass probate. One common method is to create a living trust. In California, a living trust can hold almost any type of asset, including real estate, bank accounts, and personal property.

Another strategy is to designate beneficiaries for your retirement accounts and life insurance policies. This is typically done when you open the account or take out the policy, but it’s important to review these designations regularly and update them as necessary.

What Happens if I Don’t Plan for Probate?

If you don’t plan for probate, your assets will be distributed according to California’s intestacy laws. This means that the state determines who inherits your assets, not you. This process can be lengthy, costly, and stressful for your loved ones.

For example, let’s say you’re unmarried but have two children. If you pass away without a will or any other estate planning measures in place, your assets will be divided equally between your children. But what if you wanted one child to receive a larger share due to their financial situation, or because they helped care for you in your later years? Without proper planning, your wishes won’t be taken into account.

Can I Avoid Probate with a Will?

A common misconception is that having a will allows you to avoid probate. This is not the case. A will is simply a document that outlines your wishes for how your assets should be distributed after your death. It does not, however, bypass the probate process.

In fact, a will must go through probate in order for your assets to be distributed. The court will validate the will, appoint an executor, and oversee the distribution of assets. This process can be time-consuming and costly, which is why many people opt for strategies that bypass probate.

What is a Small Estate Affidavit and How Can It Help?

In California, if the total value of a deceased person’s estate is under a certain amount, the estate may qualify for a simplified probate process using a small estate affidavit. This can be a quicker and less expensive way to distribute the assets of the estate.

A small estate affidavit is a legal document that allows the transfer of certain assets without going through the formal probate process. It can be used for personal property, but not for real estate. The person who is entitled to inherit the property can present the affidavit to the institution or person holding the property, who will then transfer the property without requiring probate.

However, there are specific rules and limitations for using a small estate affidavit, and it may not be the best choice for every situation. An experienced attorney can help you determine if this is a viable option for your circumstances.

Can I Use a Life Estate to Avoid Probate?

A life estate is another tool you can use to avoid probate. In a life estate, you (the life tenant) retain the right to live in or use the property during your lifetime. Upon your death, the property automatically passes to the remainderman (the person you’ve named to inherit the property), bypassing probate.

However, a life estate comes with its own set of complexities. For instance, as the life tenant, you cannot sell or mortgage the property without the consent of the remainderman. Additionally, the property could be subject to recovery by Medicaid, if you’ve used its benefits to pay for long-term care.

Can a Lawyer Help Me Bypass Probate?

Yes, an experienced estate planning lawyer can help you plan your estate in a way that minimizes or even eliminates the need for probate. They can help you set up a living trust, advise you on joint tenancy, and ensure your beneficiary designations are up to date.

If you’re planning your estate or dealing with the estate of a loved one, consider consulting with an experienced attorney to protect your rights and ensure your wishes are carried out.

If you’re considering estate planning or dealing with the estate of a loved one, call the Resolve Law Firm today at (213) 583-5547 for a free case evaluation!