What you need to know about PROBATE and how to avoid it

There is a saying: “Where there’s a will, there’s a way.” In estate planning, it should be: “Where there’s a will, there’s a probate.” In California, a will has to go through probate. So a will doesn’t help you avoid probate. It guarantees probate. Still, you might ask, is there a way to avoid probate if you have a will? The short answer is, it depends. There are circumstances where you can avoid probate. First, let’s define –

What is Probate?

Probate is the legal process in which a will is reviewed by a court to determine whether it is valid and authentic. The court then will order distributions of property to beneficiaries according to the will’s terms. Probate also refers to administering a deceased person’s estate without a will. If you die without a will, the probate court will rely on state laws to distribute assets and pay any liabilities remaining in your estate. A clearly written will could make the probate process easier for your beneficiaries after you die, but it it’s not enough to avoid probate.

What is wrong with Probate in California?

Many people have heard that probate in California is something you should avoid. There are four main reasons for this.

First, probate is slow. In Sacramento County, Yolo County, Placer County, Solano County, and the surrounding areas, it may take anywhere from 18 to 24 months from the time a probate case is started until it is done. This is a very long time, particularly if family members or other heirs are in need of a distribution from the estate to pay their bills.

Second, probate is expensive. The probate law says that an executor who is managing the probate estate can be paid a fee for their services as executor. This makes sense, since the executor is essentially taking over all of the finances of the decedent. The fee paid to the executor is a percentage of the gross estate value. “Gross estate value” means the fair market value of the decedent’s probate assets on the date of their death, without subtracting any debts. For example, assume that a decedent owned a house with a fair market value of $1,000,000 on their date of death. Further assume that the house had a mortgage of $800,000. The executor’s fees will be based on the $1,000,000 fair market value, and not on the $200,000 equity in the house. The probate code also says that the executor can hire an attorney to help the executor administer the estate. The attorney is paid the same way as the executor: As a percentage of the gross estate value, valued as the fair market value of the probate assets.

The third problem with probate in California is that a probate proceeding is public. Everything that gets filed with the court is a public record, with certain rare exceptions. This means that the will becomes public, as well as who will inherit under the will. One of the last things that the executor does before the court will sign an order authorizing that property be distributed to the beneficiaries is to file an “inventory and appraisal” of all of the probate assets the decedent owned on their date of death. This lists the assets and property that the decedent owned, along with the fair market values. So on the one hand, you have who is receiving property under the will. On the other hand, you have what that property is and what it is worth. This is a lot of private personal financial information to have in the public domain.

The fourth problem with probate is that the law requires that if a beneficiary under the will legally is an adult, they are entitled to their inheritance outright.

If the beneficiary is a minor, the court will take steps to protect the minor’s inheritance, usually by putting the money in a blocked account that restricts access to the money until the beneficiary legally is an adult. In California, somebody is legally an adult when they turn 18. This means that somebody who is 18, 20, or even 25 years old is entitled to receive all of their inheritance outright, without restrictions. This may be contrary to what the decedent wanted, and may not be in the beneficiary’s best interest.

Because of the problems with probate, many people want to avoid it. Here are three ways you can avoid probate.

1. You Can Avoid Probate With A Spousal Set Aside

If you are married, and you and your spouse have separate, individual wills, if your spouse dies first, you can use what’s called a “Spousal Set Aside” to bypass probate. A Spousal Set Aside is an optional procedure in the probate law that allows for short cutting the probate administration of community property you own with your deceased spouse and of your deceased spouse’s separate property that passes to you. The set aside procedure provides a formal court order related to the decedent’s property that passes by will or intestacy to you, the surviving spouse. It also confirms the community property interests that already belong to you as the surviving spouse.Generally, you can only use Spousal Set Aside for property that you already share with your deceased spouse.

Spousal Set Aside has a number of risks. First, it leaves the surviving spouse open to claims from the deceased spouse’s creditors and beneficiaries. Second, it leaves the surviving spouse open to claims for the deceased spouse’s medical bills and funeral expenses. Another problem with the Spousal Set Aside is that it only works upon the death of the first spouse: If the surviving spouse doesn’t do any estate planning after the deceased spouse’s estate is finalized, the surviving spouse’s estate will likely have to go through probate upon the surviving spouse’s death.

2. You Can Avoid Probate With A Small Estate Affidavit

If the decedent died with assets and property worth less than $184,500 (in 2023), and died with real estate worth less than $61,500, you may be able to avoid probate by using an “Affidavit of Small Estate.” The $184,500 is the value of the entire estate, and not the value of an individual asset. The following personal property, however, are excluded from “small estate” claims:

• Cars, boats, or mobile homes
• Real property outside of California
• Property held in trust, including a revocable living trust
• Real or personal property that the person who died owned jointly with someone else (such as joint tenancy)
• Property that passes directly to a surviving spouse or domestic partner
• Life insurance, death benefits, or other assets that pass directly to beneficiaries
• Unpaid salary or other compensation up to $5,000 owed to the decedent
• Debts or mortgages
• Bank accounts

3. You Can Avoid Probate If You Have A Funded Revocable Living Trust

There are two general steps to using a Revocable Living Trust as the foundational document for your estate plan: (1) Establishing the Trust; and (2) Funding the Trust. An estate planning attorney can help you create your trust. After your trust is created, you should begin the process of funding the trust. “Funding your trust” is an umbrella term which is used to describe the process of changing ownership of certain of your assets in property so that it is owned by the trust instead of being owned by you individually. A Revocable Living Trust is like securing your estate in a vault: It not only prevents an unnecessary and costly probate case, it also protects and distributes your estate according to your plan.

Consult an Estate Planning Attorney To Avoid Probate

Compared to a will, a Revocable Living Trust provides privacy as well as flexibility over your property. Schedule your consultation with our team who can help get started with your estate planning.