Avoiding probate is easy if
you plan ahead. The benefits are lower costs for your estate
administration and less frustration for your family. See the Probate Page
for reasons to avoid probate. Among the methods of
avoiding probate are the following:
LIVING TRUSTS:
Assets owned through a living trust do not need to be probated.
JOINT TENANCY:
If an asset is owned by two or more people as
joint tenants,
it will usually not be probated. These assets can be identified by the
words "joint tenants," or "in joint tenancy," "JT TEN," or similar
wording. When a joint tenant dies, the other joint tenant takes 100
percent ownership of the asset. This occurs regardless of the
provisions of the will or trust of the deceased joint tenant. In other
words if a house is held in joint tenancy by persons A and B, and A
dies, it doesn't matter what A's will said about the house because the
joint tenancy has a higher priority and the house
will be owned 100 percent by B. If this is what A and B intended, then
joint tenancy might be beneficial to them. Otherwise, they should use
some other form of ownership, such as tenancy in common.
Joint tenancy is not recommended for assets that
can increase in value, such as a residence, because the surviving joint
tenant will not receive a "stepped up cost basis" to fair market value
at the date of death of the other joint tenant.
Cost basis is used to determine capital gains. For many homeowners, the
cost basis is the price they paid for their home, plus any capital
improvements that have been made. The cost basis is subtracted from the
selling price to determine the capital gains. When a married couple owns
an appreciated asset as community property, the surviving spouse will
get a step-up in the cost basis to the fair market value at the date of
death of the other spouse. In other words, if the surviving spouse has
to sell the residence, he or she is unlikely to have to pay any capital
gains. But if the residence is held in joint tenancy, it is more likely
that some capital gains tax may be due. Federal law allows the surviving spouse a capital gains exclusion of
$250,000, but for some California residents, even this amount may not be
enough to prevent payment of capital gains tax when a residence is sold.
For more information, see this page: Joint Tenancy
SMALL ESTATES:
The California Probate Code provides that probate estates of less than
$150,000 do not need to be probated. In some cases, the total estate may
be considerably larger than $150,000, but the small estate law can still
be used. The reason is that many assets are not defined as probate
assets, such as life insurance (unless it was payable to the estate),
IRAs, 401Ks, assets held by a living trust, and joint tenancy assets.
The $150,000 amount is calculated by totaling all of the probate assets
owned by the decedent. For more information, see the
small estates page.
SPOUSAL PROPERTY PETITIONS:
If the decedent is survived by a spouse, the spouse can file a
spousal property petition with the court. The purpose of this petition is to
change the titles of the assets to the surviving spouse's ownership. The
petition is a simplified probate, and takes much less time than a full
probate. Legal fees are usually much lower for this type of petition
than a full probate. Spousal property petitions can be used when
the decedent did not have a will and the couple owned community
property, or when there was a will and the spouse is the main
beneficiary.
