One of the reasons that many Californians put an estate plan in place is so that their heirs can avoid probate. Probate is basically the legal process of settling an estate.
The probate process in California can be costly in time and money. It can take as long as two years before heirs and beneficiaries receive what has been left to them. Further, legal fees can take a percentage of the estate.
Another good reason to avoid probate is that you can keep the estate private. Probate files are public record. People can see what others inherited and try to make a claim themselves if they feel they’ve been short-changed or forgotten.
Many people avoid probate by having other owners listed on their accounts or property. If you co-own an account or property with a spouse or adult children who have right of survivorship, the assets transfer directly to them on your death.
Another good planning tool is to have designated beneficiaries where possible. You can do this on retirement accounts, investment accounts, insurance policies, Health Savings Accounts (HSAs) and more.
Living trusts are a popular estate planning tool, not just to avoid probate, but because they can make estate administration easier for the person designated as the successor trustee. Generally, with revocable living trusts, the person who sets it up is the trustee until he or she dies or is incapacitated. The successor trustee then takes over. Assets in these trusts don’t have to go through probate.
If there are assets you don’t need or want, you can give them to loved ones while you’re still alive. Therefore, they won’t be part of your estate or subject to probate. However, if these gifts are worth a considerable amount, it’s important to determine what the tax implications could be for those who receive them so that you can take steps to minimize those.
An experienced California estate planning attorney can help you ensure that your wishes for your estate are properly and legally detailed. You want to ensure that you’ve done all you can to minimize the cost and stress of settling your estate to your loved ones after you’re gone.
Source: Investopedia, “Why and How You Should Keep an Estate Out of Probate,” Jiyao Xu, CFP, Jan. 09, 2018