None of us know how many sunrises and sunsets we have left to enjoy. The end of our lives can come at any moment and though we all hope for years more to enjoy time with family and friends, the end of our stories can come faster than we expect. While we are able to make end of life decisions for ourselves, it’s important to make the choices to ease the burden on our loved ones.
No matter your age, whether you are into your senior years or growing into young adulthood, it is important to have end of life paperwork completed and regularly updated. Without these important legal documents in place at the time of your death, all your accounts and assets will be sent through a process called “probate” which can potentially drag on for years and cause great angst for those left behind.
To save your family members this heartache on top of the grief of losing you, take steps now to keep your estate out of the probate process so the transition of accounts and various assets can take place as quickly as possible so family and friends can focus on grieving you.
What is probate?
Probate is the legal process after a person dies when their will is reviewed and assessed as authentic, and assets are distributed according to a person’s wishes (if legally known). Probate also refers to the process when someone passes without legal paperwork in place and a judge determines how to distribute their assets according to set laws of who inherits. If a person has a will, the court will appoint an executor or if there is no will, an administrator, to collect the assets, pay any debts the deceased has remaining, and distribute the assets as the court dictates.
Keep your assets out of the probate process
Whether a person has a will or not, probate can be extremely costly with all the legal fees and court costs. This amount comes out of a person’s estate leaving less money for those left behind. Going through the probate process can also take months or even years. In the meantime, burial costs and debts left from your estate still need to be paid but can’t be until the funds are released. As this process drags on for your loved ones, all these legal proceedings are held in the public record, potentially exposing information your family would rather keep private as decisions you would have liked to make are made by a judge instead.
Plan your estate to avoid probate
By pre-planning what will happen to all your assets and filing the correct legal paperwork, you can make the whole process far easier for your family members. Instead of the angst of dealing with a financial mess, your loved ones can breathe easy and quickly turn over your assets to those you want to obtain them.
Under California law, there are several ways you can handle your assets to avoid probate:
- California probate exemption: The state of California has a simplified process in place for those whose estates fall under a predetermined maximum. For those who pass away after April 1, 2022, the current maximum is $184,500. However, not all assets in an estate are counted toward this maximum so you may still qualify if you have a larger estate. Items that do not count toward the maximum include property held in a living trust or joint tenancy, real estate outside of California, cars, boats, and mobile homes, property that goes to a surviving spouse, life insurance, death benefits, or payable-on-death accounts, transfer-on-death deeds, bank accounts owned by more than one person, or unpaid salary up to $18,450. What does count toward the maximum is property you alone own in California, accounts solely under your name with no named beneficiary, and personal effects not inherited by a spouse, among others items. If your estate qualifies for this exemption, then your family will need to determine which paperwork to file based on whether the exemption includes real estate or not and wait the appropriate time to turn in the paperwork after you pass away. Depending on the process your estate qualifies for, your assets will then be distributed to the correct person. While this is still a process, it is far shorter and simpler than going through regular probate.
- Right of survivorship: transfer-on-death, payable-on-death accounts: Some accounts and assets have legal ways of immediately transferring the asset to someone else after you pass away. To do this, you must declare the beneficiary to that account or asset while you’re still alive. Examples of this include life insurance, bank accounts, retirement accounts, and investments. While you are alive, the person named as beneficiary has no right to the account and you retain sole custody of your assets until you pass away and the account is transferred to the person you have selected.
- Place your assets under a trust: A trust is a legal entity that owns any assets placed under its legal protection, held in trust for a beneficiary. All assets under the trust will be kept out of probate. Each trust then has a trustee: a person in charge of managing the trust’s assets. While you are alive, you yourself will usually serve as the trustee and will name a secondary trustee for when you pass away or are debilitated. Whoever is the trustee can then distribute the assets according to the rules set forth in the trust’s legal paperwork. Trusts can also be beneficial in protecting your assets if there is ever a legal judgment against you and can help lower estate taxes. Trusts can be arranged in many different ways to benefit various people and you would need to consult an estate lawyer to determine what kind of trust is right for you. Keep in mind any property not included in the trust is still subject to probate.
- Transfer of Real Property with Retained Life Estate: In California, you can transfer your property to a beneficiary before you pass away with “retained life estate.” This means that while your property belongs to someone else, such as one of your children, you keep your right to the property while you are alive. Upon your death, they obtain sole right to the property while avoiding it going through probate. Before this action is taken, however, thought must be given to tax implications and how property expenses will be handled while you’re living.
- Spousal petition: If you are legally married when you pass away, a spouse can file a “spousal petition” to obtain rights to your assets. A court hearing is then required to authorize the changing of ownership of any titles and accounts to the surviving spouse. While still technically probate, it is a far simpler procedure, takes less time, and the legal fees are usually far less.
Seek legal counsel when estate planning
The above information is not legal advice and is here to provide general information. When planning your estate and filing legal paperwork, always consult the advice of an estate lawyer. They will be able to advise you on what types of accounts, trusts, and beneficiary planning is right for you and your specific situation as well as establishing your end-of-life wishes for medical care.
Keep your paperwork updated
As we live our lives, who we want as beneficiaries may change over time. Relationships come and go, other people pass away, and children are born you may want to benefit from your estate. Make sure you check your estate planning periodically and make adjustments to beneficiaries or lists of accounts. A good estate lawyer may build regular reviews into your estate planning package.
By planning ahead and keeping your paperwork updated for your current situation, you can help those grieving your loss by keeping your estate out of the probate process and your assets easily distributed. Make sure the person responsible for the final distribution is familiar with your legal wishes and that they know where to find the legal paperwork and how to contact your lawyer.