How to Avoid Probate In California Even if You Don’t Have a Trust
One of the reasons we take the time to plan ahead and create an estate plan is to reduce or eliminate the delays and costs of a California probate. However, and despite best efforts, we are sometimes left with having to deal with probate — the court-supervised process that allows an estate’s representative to wrap up final affairs and distribute assets.
Without a trust, probate is inevitable in California. That said, there are some probate alternatives. These alternatives to probate, if available, can transfer property in a decedent’s estate quicker and cheaper than a full, formal probate.
If you haven’t had a chance, please check out our probate practice. That section includes details of a California probate and how it works. This article will address the different alternatives to transfer probate property in California after a property owner’s death to the extent they are available.
Key Takeaways
Probate is an expensive, long, and complex process
Even if you don’t have a trust, there are alternatives to avoid probate in California
CREATING NON-PROBATE PROPERTY
Probate administration is only necessary to transfer probate property after the owner’s death. The primary way to avoid a probate is to use estate planning, which changes the related probate property to non-probate property during the owner’s lifetime. After the owner’s death, the non-probate property transfers through that estate planning or by operation of law, without the need for a probate.
Your first line of defense against probate is the revocable or irrevocable trust. Trusts provide the ultimate flexibility for administration of a decedent’s estate without the need for a probate. Although trusts are generally slightly more expensive to establish than a simple will, the administration cost savings over a probate usually are significant. In fact, we’ve done some basic math for you to demonstrate this.
You can also create non-probate property through each of the following avenues:
Joint ownership of property (for example, real property) and accounts with survivorship rights
Beneficiary designated accounts (for example, pay on death (P.O.D.) or transfer on death (T.O.D.))
Life estate and transfer on death deeds
The affected property will transfer by operation of law upon the death of the owner that created the non-probate property, without the need for a probate. However, there is no way to control the assets after the death of the property owner.
For example, in joint ownership arrangements, the surviving owner takes outright title to the whole property after the death of the first joint owner. No provisions for protection of assets and beneficiaries can be made in this scenario. Similarly, beneficiaries inheriting property through P.O.D. and T.O.D. accounts cannot be protected from creditors because they take title to the property without any protections in place. Life estates and transfer on death deeds also have the same issue. All of these options do not allow for control and potentially leave tax avoidance options on the table for the survivor.
For more information on revocable trusts, you can explore our estate planning practice and Resources.
WHAT ARE PROBATE ALTERNATIVES IN CALIFORNIA?
Other than creating non-probate property, what are some alternative avenues to transfer a decedent’s property to designated beneficiaries, intestate heirs or spouses without a full probate administration? Below, you’ll find various probate alternatives, each having risks and benefits, and often unique circumstances when they can be used.
Transferring Probate Property
Probate property (that is, property which is not non-probate property) is normally be subject to probate administration before it may be transferred to beneficiaries after the owner’s death. There are processes, however, by which these assets can be transferred to the appropriate beneficiaries without a full probate, in certain circumstances. These processes include:
Small estate set asides
Petition to determine succession to real property
Affidavit for transfer of personal property in estates with a total value of less than $166,250, commonly known as the small estate affidavit, as distinct from the small estate set aside
Affidavit for transfer of real property in estates with less than $50,000 of real property
Family allowance petitions
Spousal property petitions
Homestead exclusions
Special transfers of vehicles and vessels
This article will focus on the first three California probate alternatives. For more information about the other alternatives, please get in touch.
Small Estate Set Asides
The small estate set aside is a useful tool to transfer certain small estates by petition for the benefit of the decedent’s spouse, registered domestic partner, or minor children, regardless of any provisions in decedent’s will to the contrary. These small estates generally involve decedents who die with no probate real property in California (though, they may own real property in a trust or with a survivorship interest) and very limited assets.
The spouse or decedent’s minor children may file a simplified petition to request the decedent’s estate set aside to either the spouse or children without formal probate, if the value of the decedent’s property, consisting of decedent’s separate property and any community property interest, is less than $20,000 (Cal. Prob. Code §§ 6602 and 6604).
Certain property, including all non-probate property, is not included in calculating the value of the decedent’s estate for the small estate set aside. This includes:
All joint tenancy property (that is, jointly-owned property with a survivorship right)
All payable on death accounts
Any life estates or other property where the decedent’s interest terminated at death
The value of any liens or encumbrances on the decedent’s property
The amount of any probate homestead interest (Cal. Prob. Code §§ 6600 and 6602.)
Any property set aside remains available to pay the decedent’s unsecured debts (Cal. Prob. Code § 6611(a)). That said, the recipient’s liability is limited to the date of death value of the property after accounting for liens and encumbrances, any probate homestead, and any amount of exempt property (Cal. Prob. Code §§ 6611(b) and 6510).
Petition to Determine Succession to Real Property
A petition to determine succession to real property is an expedited probate alternative for estates that have a gross value of less than $166,250 and contain real property (Cal. Prob. Code §§ 13150 to 13158). The estate value excludes the same types of property as the transfer by affidavit procedures (Cal. Prob. Code § 13151). The petition to determine succession to real property is primarily used when:
The decedent’s estate contains real property
The value of the decedent’s estate is less than $166,250
Creditor claims are not a consideration
California probate of the decedent’s estate is not required or anticipated or the estate’s personal representative joins in the petition
To start this probate alternative process, you have to begin by filing a petition on the mandatory judicial counsel form DE-310 along with a completed inventory and appraisal.
The main advantage of a real property succession petition is speed and because of the reduced timeframe, this means lower cost. The process can be stared as soon as 40 days after the person in question has passed away, and because it requires 15 days notice (Cal. Prob. Code § 13153), it can in theory lead to resolving the matter in 55 days. Keep in mind, however, that California courts are extremely impacted, and actual timeframes may be much longer.
Another benefit to this probate alternative is that real property succession petitions are not subject to the statutory attorney and executor fees. This means the fee will be subject to your private arrangement between you and your attorney. As there is usually requires significantly less work involved, there is often a lower overall cost.
One disadvantage to this probate alternative is that liability to creditors and estate restitution. The property recipients are personally liable to the decedent’s unsecured creditors up to the net value of the property received (Cal. Prob. Code § 13156). That said, unsecured creditor claims are generally barred one year following the decedent’s death (Cal. Civ. Proc. Code § 366.2).
For more information regarding petitions to determine succession to real property, please get in touch.
Affidavit for Transfer of Personal Property
The Probate Code allows transfer of a decedent’s personal property by affidavit (also called a small estate affidavit) for estates valued under $166,250 and without real property (Cal. Prob. Code §§ 13100 to 13116). The estate must not contain real property (Cal Prob. Code § 13115). In valuing the estate, the following property is excluded:
Joint tenancy property.
Life estates or other interest terminating after the decedent’s death.
Multi-party accounts with a right of survivorship.
P.O.D. and beneficiary designated accounts, except those payable to the decedent’s estate.
Property held in a revocable living trust.
Vehicles and vessels registered with the California Department of Motor Vehicles.
Manufactured, mobile, and floating homes, including commercial coaches and truck campers, registered under the Manufactured Housing Act of 1980.
All amounts due the decedent for services in the US Armed Forces.
Up to $15,000 of salary or other earnings from employment, including unpaid vacation time.
Property passing to the surviving spouse under intestacy or by will without administration (see Spousal Property Petitions).
If an estate qualifies, the decedent’s successors, which include the decedent’s testate and intestate beneficiaries, trustees of the decedent’s trust, and out-of-state personal representatives, among others, may:
Collect money and property owed to the decedent.
Receive the decedent’s tangible personal property.
Transfer debts or obligations belonging to the decedent, whether or not secured by a lien on real property.
Transfer is accomplished by presenting the holder of the property with an affidavit or declaration at any time after 40 days following the decedent’s death (Cal. Prob. Code § 13101).
Recipients of property transferred by affidavit are personally liable to the decedent’s unsecured creditors and a later restitution request by the personal representative (Cal. Prob. Code §§ 13109 and 13111).
For more information on transfer of personal property by affidavit, see Cal. Prac. Guide Probate Ch. 2-A, Section 2:6.
The transfer of tangible personal property by affidavit provides flexibility to estate planners and clients in determining a proper estate plan. A client may be better served by a will if there is no real property and the estate value is likely less than the statutory maximum. The client’s beneficiaries can use the affidavit to transfer the property as set out in the will, rather than through a formal probate. Where significant debts are involved, the beneficiaries may elect formal administration to use the creditor claims procedures.
In preparing a living trust, the estate planner should consider if a better course of action is to generally assign the client’s tangible personal property to the trust or not. If not, any specific bequests of tangible personal property are normally contained in the client’s pour over will with any residuary transferred to the trust.
For a form of affidavit for transfer of personal property, see Standard Document, Small Estate Affidavit for Transfer of Personal Property (CA).
Affidavit for Transfer of Real Property of Small Value
Similar to personal property, real property of small value may also be transferred by affidavit (Cal. Prob. Code §§ 13200 to 13210). This is available if the gross value of the real property is less than $50,000. The value of the property excludes the same property as a transfer by affidavit and real property transferring by right of survivorship or from a trust.
To get this process underway, you have to begin by filing with the court an affidavit conforming to statutory requirements (Cal. Prob. Code § 13200(a)). The Judicial Council of California adopted a mandatory form for use with small value real property transfers. The affidavit must include, among other items, an inventory and appraisal completed by a California probate referee (Cal. Prob. Code § 13200(c)).
If the court clerk accepts the affidavit, a certified copy will be returned to you. Once you receive it, you then have to record the copy with the county recorded in the jurisdiction where the property is located. (Cal. Prob. Code §§ 13200 and 13202).
One downside to this probate alternative is the waiting period before filing is six months from the date of the decedent’s death (Cal. Prob. Code § 13200). Like other probate alternatives, the recipient is personally liable for the decedent’s unsecured debts, restitution of the property to the estate on the personal representative’s demand, and claims of persons with superior testate or intestate rights to the property.
Some key differences between an affidavit and a petition to determine succession to real property include:
Real property less than $50,000 versus real property less than $166,250
Real property only versus both personal and real property when using a petition
Six months from the date of death versus proceeding after 40 days.
CONCLUSION
As you can see, there are many way to avoid probate in California even if you don’t have a trust. Check our Resources for further discussion in this regard as we’ll be covering the next four alternatives to probate in a future article. To ensure you can avoid a full California probate even without a trust, schedule a strategy session today. Keep planning smarter.
Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.
At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.
On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.
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