Avoiding Probate in California 

Avoiding probate is easy if you plan ahead. The benefits are lower costs for your estate administration and less frustration for your family. Among the methods of avoiding probate are the following:

Assets owned through a living trust do not need to be probated.

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.

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.  

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.  A spousal property petition is not used when all of the decedent's assets were in a trust.

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