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Exploring Alternatives to Probate for Real Estate in California

Posted by Jessica Ward | May 06, 2024 | 0 Comments

When it comes to transferring real estate after a property owner passes away without proper estate planning, probate may be the only option. Probate can be time-consuming, expensive, and oftentimes leads to delays in distributing assets to heirs. Fortunately, in California, there are several alternatives to pass on real property in lieu of opening a formal probate matter. This article explores these alternatives in detail.

Understanding Probate in California

Before delving into the alternatives, it's essential to understand probate and why many people want to avoid this process. Probate is the court-supervised process of distributing a deceased person's assets to beneficiaries or heirs. If the decedent had a Will, they are said to have died "testate." If the decedent did not have a will, they are said to have died "intestate." The California Probate Code sets forth the heirs that will inherit for those who die intestate. 

When the the value of assets exceed $184,500.00, probate will be required to appoint an executor or administrator, notify creditors, validate the Will if there is one and distribute the estate pursuant to the terms of the Will or the California laws of intestacy if there is no Will. 

In California, the probate process can be lengthy and costly, often taking months or even years to complete.

Alternatives to Probate for Real Estate in California

There are several alternatives to probate in California, below these options are explored. 

Revocable Living Trusts

A revocable living trust is one of the most popular alternatives to probate in California, especially for real estate. With a living trust, the trustmaker transfers ownership of their assets, including real estate, into the trust. However, the trustmaker retains full control of their assets during their lifetime but can direct who the assets are passed to upon their death, or the assets can be held in trust for a beneficiary who has not yet reached the age set by the trustmaker at the time the trust was created. 

Benefits of Revocable Living Trusts
Avoidance of Probate: Since the property is owned by the trust, it doesn't go through probate.
Privacy: Unlike probate, which is a public process, the details of a living trust do not have to be filed with the Court.
Faster Distribution: Assets can be distributed to beneficiaries much more quickly compared to probate.

Joint Tenancy with Right of Survivorship (JTWROS)

Joint tenancy is another way to transfer real estate without going through probate. In California, when property is held in joint tenancy with the right of survivorship, it means that when one owner dies, their share of the property automatically passes to the surviving owner(s). The surviving joint tenant only needs to file an Affidavit of Death of Joint Tenant with the County Recorder. This completely avoids probate and allows for transfer of the property without delay. 

This method may fail however, if both Joint Tenants pass away, or if after the surviving Joint Tenant dies, they fail to protect the property with another probate avoidance method. 

Benefits of Holding Title in Joint Tenancy
Automatic Transfer: Upon death, the deceased owner's share passes directly to the surviving owner(s) without probate.
Simplicity: Setting up joint tenancy is relatively straightforward.

Revocable Transfer-on-Death Deed (TOD Deed)

A Transfer-on-Death Deed allows an owner of real estate to designate one or more beneficiaries to inherit the property upon their death. This transfer occurs automatically and bypasses probate completely. As mentioned above, similarly with Joint Tenancy, if the property owner fails to update the beneficiaries and they pass away before the property owner, the property will have to pass through probate. Further, the property owner should review the beneficiary designation often to ensure that the Transfer on Death Deed still reflects their wishes.

Benefits of Revocable Transfer-on-Death Deed
Avoids Probate: Real estate passes directly to beneficiaries without probate.
Flexibility: The owner retains full control and can revoke or change the beneficiary designation at any time.

Community Property with Right of Survivorship (CPWROS)

In California, spouses can hold property as community property with the right of survivorship. Similar to JTWROS, when one spouse dies, the other automatically inherits the deceased spouse's share. It is important that the surviving spouse to speak with an estate planning attorney so that they can determine how to avoid probate if they should pass away. Additionally, if both spouses pass away at the same time, or shortly after one another, probate will be required. 

Benefits of Holding Title as Community Property with Right of Survivorship
Simplified Transfer: Upon the death of one spouse, the property automatically transfers to the surviving spouse without probate.
Potential Tax Benefits: Community property enjoys a stepped-up basis upon the death of one spouse, which can have tax advantages.

Conclusion

In California, alternatives to probate for real estate offer individuals various options to transfer property efficiently and avoid the formal probate process. Whether it's through a revocable living trust, joint tenancy, transfer-on-death deed, or community property with the right of survivorship, these alternatives provide flexibility, privacy, and faster distribution of assets to beneficiaries. However, some of these alternatives may not be right for your situation. Consulting an estate planning attorney will help you determine the best option based on your individual circumstances and goals. To speak with an attorney contact Jessica Ward at (925) 459-1777. 

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