Avoiding California Probate

Early planning is best but opportunities survive death and disability

Probate is slow, public, and expensive. Even the best probates drag on for months of paperwork, court filings, and hearings. Probate proceedings occur in open court so anyone can access sensitive information about your assets and beneficiaries. Statutory probate fees, in addition to court and other costs, begin at 4% of the first $100,000, 3% of the next $100,000, and 2% of the next $800,000. Thus, probate is usually something you want to avoid.

As you may have heard, probate is easy to avoid as long as the principal remains healthy enough to execute documents such as deeds and trusts. Putting property in a living trust avoids probate. Titling property in joint tenancy or community property with right of survivorship can avoid probate. Naming a living person as a beneficiary of a retirement plan or life insurance policy avoids probate. Each of these avoidance methods has its own advantages and disadvantages. Your attorney’s role is to advise and implement the best methods for your particular circumstances.

What if the principal fails to take prudent steps to avoid probate? When the principal's heath deteriorates to the point that they can no longer sign a legal document, probate can still be avoided if a family member is empowered to act for the incapacitated principal. The easiest way to empower a family member is for the principal to execute a durable power of attorney while the principal retains legal capacity to do so. Absent a durable power of attorney, the family member may need to petition the court for authority to act. Such a petition can be expensive and subject the family member to ongoing court scrutiny. Obviously, a durable power of attorney executed in advance is much better than going to court after a disabling event. However, if you have an old power of attorney, you may have to go to court to force a bank to recognize it. It's prudent to refresh powers of attorney from time to time.

After the principal dies, the probate avoidance game changes but it's not over. Your power of attorney becomes meaningless at the moment of death. The post mortem game is based on the rule that uncontested estates under $100,000 are generally exempt from probate and the fact that certain exempt transfers may be deducted from the gross estate to bring it under the $100,000 limit. So, if the probate estate appears to be over $100,000 your attorney will review each item to see how it might qualify as an exemption. In some circumstances, your attorney will petition the court to exempt otherwise non-exempt transfers. Because the $100,000 exemption applies to uncontested estates, the other part of the post mortem game is to keep everyone properly informed so misunderstandings do not boil over into court contests.

Sometimes the best efforts of the best attorney on the planet can't keep you out of probate. If someone dies with over $100,000 of exposed assets that don't qualify for an exemption, the estate is going into probate. Sometimes this is due to a lack of planning and sometimes this happens by mistake. It is fairly common for a widow or widower to forget to deed a new retirement home into trust or fail to name a new insurance beneficiary after a spouse's death. I see many boiler plate trusts that are meaningless because assets were never properly transferred to them. When someone's health is failing, you should review property titles and beneficiary designations in addition to their estate planning documents. Don't be lured into complacency by a three ring binder with colored tabs and lots of paper.