There are three (3) ways to avoid probate in California:
- Have a small estate; or
- Have only non-probate assets;
- Have a living trust hold title to probate assets.
A will alone does not avoid probate.
Small estates
Obviously, if you have no assets, there is no need for probate. In order to reduce the burden of administrating small estates, if someone owns less than $150,000, their family members or heirs can use a small estate affidavit instead of filing for probate.
The $150,000 refers to the gross value of the total estate. So, if someone had a checking account worth $100,000, a saving account with $40,000, a car worth $15,000, the small estate procedures won’t work.
Further, the $150,000 does not apply to real estate. Even if you have real property worth less than $150,000 in California, a petition will still need to be filed to transfer title to real property.
Non-probate assets
Some types of assets don’t need to go through the probate process and can go directly to your beneficiaries (non-probate assets). If your entire estate consists of non-probate assets, your heirs can avoid probate.
Non-probate assets can include the following:
- Bank or stock brokerage accounts held in joint tenancy
- Life insurance or brokerage accounts with a valid beneficiary designated
- Retirement accounts with a valid beneficiary designated
- Property that is held in joint tenancy or community property with right of survivorship
If all your assets are non-probate assets, then you don’t have to worry about probate. However, there may be other reasons why you need an estate plan, such as providing for a minor child or minimizing tax liability.
Also, keep in mind: A will does not control the distribution of non-probate property.
Example: Your only asset is a life insurance policy where you named Susie as your beneficiary. Later, you create a will leaving everything to Bob. When you pass away, Bob gets nothing. Why? Because the life insurance beneficiary is Susie, which passed outside of probate. Your will doesn’t change the beneficiary designation.
Read more about common mistakes with non-probate property.
Probate Assets
If you own probate assets worth more than $150,000, then your estate will need to go through probate. Probate assets can include the following:
- Real property
- Personal property, such as jewelry, furniture, and automobiles
- Bank accounts with only one owner
- An interest in a partnership, corporation, or limited liability company
- Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary
If you have probate property worth more than $150,000, the only way to avoid probate is through a living trust.
When planning your estate, you need to take into account whether property is probate property or non-probate property.
A living trust avoids probate
A trust avoids probate. If your assets are placed in a trust, you do not “own” them: the trustee of the trust does. Often, you are also the trustee so you remain in control of your assets in the trust. There are many different types of trusts, but the most common trust is a revocable living trust.
Revocable
A revocable trust is a trust that you can modify or amend or revoke at any time in the future. You can change the beneficiaries, you can change the terms of the trust. You can decide you don’t need it and revoke it. You stay in control of the trust.
Living
You created the living trust while you are still alive (sometimes referred to as as an intervivos trust), as opposed to a trust created after you pass away (referred to as a testamentary trust). With a living trust, you can choose your beneficiaries or who receives what, and the terms under which they inherit your property.
Trust
A trust owns property through a trustee. With a revocable living trust, you can be the trustee. This means you stay in control of the assets in the trust. You don’t need permission from anyone before selling your property or using the assets. You can continue to use your assets just as you did before you created the trust.