Unless you enjoy wasting your family’s time, energy, and money, you should look to avoid Probate here in California.  This is a hassle you don’t want to put your heirs through. Proper Estate Planning can help avoid the cost and hassles of probate in California.

By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™

Proceedings in Probate court are often long drawn out affairs.  During this process, a deceased person’s assets are transferred to the people who are entitled to inherit them.  Probate is almost always expensive, confusing, and stressful.  Pretty much anyone who has been through this process before realized the benefits of taking the necessary steps to keep your estate out of probate.

Probate laws will vary from state to state.   The following are your options to avoid probate here in California.

Set Up A Living Trust to Avoid Probate In California

For those interested in Estate Planning here in California, you should likely set up a living trust.    This will allow you to avoid probate for virtually anything of value you own.  Most notably, this will include things like real estate, bank accounts, investment accounts, your car, and even personal items or artwork.  

With the help of an estate planning attorney, you can create trust documents, which will name the person (or persons) who will act as the trustee (of your estate) after your death.  This is the first step in the process to avoid probate wherever you live in California.

The second step is to transfer ownership of your property into the trust.   From there, your property will be controlled by the terms of the trust. Don’t stress out here, while alive you will likely still be the trustee, and have control of your assets.  There are few estate planning techniques that do remove or limit what you can do with the assets owned by the trust.  Just make sure you are aware of these provisions before transferring assets.

Joint Ownership with Right of Survivorship to Avoid Probate in California

When you own assets with someone else, and this ownership includes a “right of survivorship,” then the surviving owner will automatically own the entire property.  Ok, automatic is a tad optimistic, there will be some paperwork involved, the point being, you all will avoid probate. 

Just to be clear, joint ownership must be in writing. Simply stating that you both own half the boat, artwork, or house will not help avoid probate.

The Forms of Joint Ownership are available in California:

Joint tenancy:  Property held as joint tenancy will automatically pass to the surviving owner when the other owned is no longer living.  The good news here (we are talking death….) is that probate will be avoided. 

Typically, joint tenancy is a good option for couples, whether married or not, to own real estate, automobiles, bank accounts, or other valuable property together.  Here in California, both owners are assumed to own an equal share of the property. 

Community property with right of survivorship: Since marriage often plays into estate planning and probate, we must mention that California is a community property state.   What this means is, that both spouses are assumed to both own all property or assets acquired during the marriage jointly.  This is unless other steps have been taken to keep certain assets as separate property.

Assets held as community property with a right of survivorship will automatically pass to the surviving spouse, without the hassle of probate.  Again, with some paperwork, that should be quicker and easier to manage than a probate proceeding.

Payable-on-Death Designations for Bank Accounts to Avoid Probate in California

In California, you can add a “payable-on-death” (POD) designation to bank accounts such as savings accounts or certificates of deposit. Some people think of this as a beneficiary for your non-retirement accounts.   You are not giving up access or control of your money, just directing the bank on what to do when you pass.

Transfer-on-Death Registration for Investment Accounts

In California, you can title your investment account as Transfer on Death (TOD).  This is typically only required an additional TOD form, which designation whom to transfer your investments to, in the event you pass away.

TOD is useful when passing assets to a non-spouse.  The joint tenancy option above is more common, at least with community property.

Transfer-on-Death Deeds for Real Estate

If you are looking to avoid probate on a California piece of real estate, you can utilize a transfer-on-death deed. These types of deeds are also sometimes called beneficiary deeds.  You sign and record the transfer on death deed now, but it doesn’t take effect until your death. With a TOD deed, you will still have the ability to revoke the deed or sell the property at any time; the beneficiary you name on the deed has no rights until your death. 

Transfer-on-Death Registration for Vehicles

California allows transfer-on-death registration of vehicles. When you register your automobile this way, the beneficiary you named will automatically inherit the vehicle after your death. No probate court proceeding will be necessary.

Simplified Probate Procedures in California

Even if you don’t do any planning to avoid probate, your estate may qualify for California’s simplified “small estate” probate procedures. This typically applies to the estate with an estimated value of less than $150,000. 

What Does Probate Actually Cost In California?

There are a variety of filing fees and court fees.  While they are onerous and annoying, they may seem minimal compared to the probate fees that will be raked in during the probate process.

California Probate Code § 10810 sets the maximum fees that your personal representative and estate planning attorneys can charge for the probate process. Higher fees can be ordered by a court for more complicated cases or ones with special circumstances. The fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000, and one-half percent of the next $15,000,000. For an estate larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000.

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Yes, I know my eyes just crossed as I read that back as well.

For your reference, the fees chart below is a quick breakdown of California statutory compensation for attorneys and personal representatives in probate cases for different sizes of estates. It is important to stress that both the attorney AND the personal representative are paid under this statute. Thus, if both the attorney and the executor elect to receive a fee, the amount paid will be double that shown below. This can be an important point about budgeting.

Again the fees below will likely be charged by BOTH the attorney and your personal representative.

Value of Estate	Compensation to Attorney/Personal Representative
$100,000	$4,000
$200,000	$7,000
$300,000	$9,000
$400,000	$11,000
$500,000	$13,000
$600,000	$15,000
$700,000	$17,000
$800,000	$19,000
$900,000	$21,000
$1,000,000	$23,000
$1,500,000	$28,000
$2,000,000	$33,000
$3,000,000	$43,000
$4,000,000	$53,000
$5,000,000	$63,000
$6,000,000	$73,000
$7,000,000	$83,000
$8,000,000	$93,000
$9,000,000	$103,000
$10,000,000	$113,000
$15,000,000	$138,000
$20,000,000	$163,000

I was not kidding when I said probate was expensive and a big hassle.  It is not uncommon for the probate process to drag on for a year if not years.

Keep in mind that debts are not included in determining the fees above.  So, let’s say you own a nice home in the Beverly Grove area, worth $2.5 million, with a large mortgage.  Probate fees will be on the market value of you the house, not on your equity in the property. OUCH!   This one issue alone could mean that your spouse or children could be forced to sell or borrow further against the home to pay the astronomical probate fees.

What about Inheriting Retirement Accounts?

Assuming you have up-to-date beneficiaries on your retirement accounts, think 401(k) or Cash Balance Pension Plan, these assets will pass to your heirs outside of probate.  Typically, it is not recommended to list your estate as the primary beneficiary, as this will pull these assets into the probate process.

6 Inherited IRA Mistakes That Will Crush Your Inheritance

After you finish reading this post, take a moment to review the beneficiaries on your various retirement accounts and life insurance or correct and up to date.  I recently had an 80-year-old widow come in with a life insurance policy that hadn’t had the beneficiaries updated since the birth of her second child (out of six kids).  She was about to inadvertently disinherit four of her children from receiving their share of her policies’ death benefit.

While I am aware estate planning is about as fun as a poke in the eye, do your heirs a favor and take the necessary steps to help them avoid probate. Work with your Certified Financial Planner™ and estate planning attorney to make sure all of your accounts are properly titled and that you have up-to-date beneficiaries listed.

Live for Today, Plan for Tomorrow.  Do your loved ones a favor and do what you can to avoid probate here in Los Angeles and throughout California.

DAVID RAE, CFP^®, AIF^® is a Los Angeles retirement planning specialist with DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. Nightline has called him a “Tax Wizard in an Expensive Suit” He is a regular contributor to the Advocate Magazine, Forbes.com,  Investopedia and Huffington Post as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook or via his website www.davidraefp.com.

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