Probate
Probate is a proceeding in State Court after a person has died. The purpose of Probate is to transfer title to property from the decedent to his or her heirs and to settle any debts owed by the decedent at the time of his or her death. Probate is completely avoidable as long as the avoidance is done before death.
Probate is very expensive. It costs approximately $3,000.00 for every $100,000.00 of gross estate (yes, that includes any debts owed)! If a dead person owned only one asset and that was a house worth $200,000.00 with a $200,000.00 mortgage the statutory Probate fees would be roughly $6,000.00! Probate takes a long time. In California the minimum time a Probate can take is 4 months. However, in reality it takes at least 6 months and frequently 1 to 2 years or more. Probate is a public proceeding. If the decedent had a Will the contents of the Will are a public record, anyone can go to the court house and find out who is going to get what!
Probate is avoidable. The existence or non existence of a Will does not determine if the estate will or will not go through a Probate. It is the amount of assets and the titling of the decedent's assets that determine if the estate will go through a Probate. If the decedent had no real estate and his or her other assets totaled less than $100,000.00 (in California only) then no Probate. If all the decedent's property was titled in Joint Tenancy, then no Probate. If the decedent's property was in a Trust, then no Probate.
Frequently husbands and wives will have as their objective in death planning the avoidance of Probate and will title all of their assets in Joint Tenancy. This will work to avoid Probate on the first death, but will not avoid Probate when the surviving spouse dies. But by titling assets in Joint Tenancy people can create other serious tax problems for themselves. First, if the estate is large enough, having a husband and wife title their assets in Joint Tenancy will avoid Probate on the first to die but the estate has just wasted a $2,000,000.00 (in 2006, 2007,2008) Estate Tax exemption! Second, if the estate is in one of the Community Property states, avoiding Probate in this fashion will cost double in Capital Gains Taxes when the property is sold!
A time tested way to avoid Probate is through the use of a "Living" or Inter vivos Revocable Trust. During the lifetimes of the individuals a Trust is created, husband and wife are both the Trustees of the Trust, so they have complete control of it. Think of the Trust as if it were the individuals Will(s) except without any Probate. The Trust is amendable and can be changed at any time by the individuals who created it. When one or both individuals die there is no Probate, provided the individuals took the time while they were living to transfer all of their assets into their Trust (yes that means re titling bank accounts, real estate, stock brokerage accounts, etc. into the name of the trust). The individuals during their lifetimes name who they want to be their trust's successor trustee. The successor trustee could be a family member, friend, an advisor or a financial institution (bank). When death occurs the surviving spouse typically takes over as the successor trustee and manages the assets. Then when the surviving spouse dies, the successor trustee named in the trust takes over and distributes the assets according to the terms the individuals stated in their trust.
Disclaimer: The information in these web pages has been prepared as a
service to the community and does not constitute legal advice. This
information may not apply to your situation particularly if you do
not live in the state of California. Do not make legal decisions based
on this material. Consult an attorney in person before making any
important legal decision.
