How To Avoid Probate

Señor Short Sale Says…. Avoiding Probate in California is easy!

It is easy to avoid probate if you prepare in advance. Here are a few of the methods for avoiding probate:

• LIVING TRUSTS: Assets owned through a living trust do not need to be probated.
• JOINT TENANCY: An asset will not usually be in probate if it is owned by two or more people as joint tenants. The assets can be identified by the words "joint tenants," or "in joint tenancy," "JT TEN," or similar wording. Also when a joint tenant dies, the other joint tenant takes 100% ownership of the asset.  It doesn’t matter what the will or trust says about the property of the deceased joint tenant.
  • One drawback to Joint tenancy is that it is not recommended for assets that can go up in value.  Such as a home, because the surviving joint tenant will not get fair market value for the home; if the home has increased in value at the date of death of the other joint tenant.
  • To determine capital gains cost basis is used. For many homeowners, any capital improvements plus the price they paid for their home is the cost basis. Then the cost basis is subtracted from the price the home sold at to determine the capital gains. Unlike when a married couple owns an asset that has appreciated as community property, the surviving spouse will get an increase in the cost basis to the fair market value at the date of death of the other spouse. An example of this would be, if the surviving spouse has to sell the home, he or she probably won’t to have to pay any capital gains. But if the home is held in joint tenancy, it is more probable that some capital gains tax may be due. Due to the fact that the federal law lets the surviving spouse have a capital gains exclusion of $250,000, but this amount may not be enough for some Californians so they won’t have to pay a capital gains tax when they sell their residence.
• SMALL ESTATES: According to the California Probate Code it states that probate estates of $100,000 or less don’t need to be probated. Therefore sometimes the whole estate might be over $100,000, but the small estate law can still apply. This is because a lot of assets are not defined as probate assets, some of those asset are IRAs, 401Ks, also assets held by a living trust, joint tenancy assets and life insurance (unless it was payable to the estate).  The $100,000 amount is determined by totaling all of the probate assets owned by the decedent.  
  • Estates that have less than $100,000 worth of probate assets are carried out by putting together affidavits(testimonies) which are given to the different businesses (brokerages, banks etc.) that hold the assets. Then the assets are given to the person who is named as executor in the will, and distributed the assets according to the will. If there isn’t a will, the assets are then distributed to the nearest living relatives of the deceased.
• SPOUSAL PROPERTY PETITIONS: The spouse of the decedent can file with the court a spousal property petition. The petition is so the spouse can change the titles of the assets to the surviving spouse's ownership. Basically the petition is a simplified probate, and takes much less time than a full probate. Legal fees are can be and usually are much lower for this type of petition than a full probate. 

***The above is for informational purposes only.  It’s always best to check with a tax advisor, accountant or lawyer before making any financial decisions.