Which Assets Must Go Through Probate in California?

In California, certain assets must go through probate while others can bypass it. Understanding which assets require probate is a critical aspect of estate planning. This knowledge helps make sure that your estate is managed according to your wishes and can also minimize unnecessary delays and costs for your loved ones.

What Is Estate Planning?

Estate planning is the process of organizing and arranging your financial affairs to make sure that your assets are managed and distributed according to your wishes after you pass away. It involves creating a comprehensive plan that addresses various aspects of your estate, including how your property, investments, and personal belongings will be handled. Estate planning also includes preparing legal documents such as wills, trusts, and powers of attorney, which help to minimize potential conflicts during the probate process. 

By engaging in estate planning, you can make informed decisions about the distribution of your assets, provide for your loved ones, reduce tax liabilities, and protect your estate from unnecessary legal complications. Effective estate planning is essential for guaranteeing that your wishes are carried out and that your estate is managed efficiently and according to your preferences.

What is Probate?

Before diving into which assets must go through probate, it’s essential to understand what probate is. Probate is the court-supervised process where the deceased’s assets are distributed according to their will or, if no will exists, according to state law. The process involves validating the will, appointing an executor or personal representative, paying off debts and taxes, and distributing the remaining assets.

California's probate process is managed by the Superior Court, and it can be lengthy and costly. Because of this, many people try to minimize the probate assets in their estate through strategic estate planning with an experienced attorney.

Types of Assets That Must Go Through Probate

In California, not all assets go through probate. Generally, probate assets are those solely owned by the deceased and not otherwise protected by estate planning mechanisms. Here’s a detailed look at which assets typically need to go through probate:

1. Solely Owned Real Estate

Real estate owned solely by the decedent is generally subject to probate. For example, if someone owns a home in their name alone, that property must go through probate before it can be transferred to heirs. This includes any residential, commercial, or rental properties. To avoid this, estate planning can involve transferring real estate into a trust, which allows for direct distribution without probate.

2. Bank Accounts Held Solely in the Decedent’s Name

Bank accounts that aren't joint accounts and don't have designated beneficiaries must go through probate. This means checking accounts, savings accounts, and certificates of deposit (CDs) that are solely in the name of the deceased will need to be probated. However, accounts with designated beneficiaries or those held in joint tenancy may bypass probate.

3. Personal Property

Items such as jewelry, vehicles, collectibles, and other personal possessions that are solely owned by the deceased may go through probate. If these items aren't transferred through estate planning tools like trusts or gifts, they'll be handled through the probate process.

4. Investments

Stocks, bonds, and other investment accounts solely owned by the decedent are subject to probate. If these investments don't have a designated beneficiary or aren't part of a living trust, they'll need to be included in the probate estate.

5. Debts and Obligations

Any outstanding debts or obligations of the deceased must be settled through probate. This includes credit card debts, loans, and other liabilities. The probate court makes sure that these debts are paid before distributing the remaining assets to the heirs.

Assets That Don't Require Probate

It’s just as important to understand which assets don't go through probate. These assets are usually those that have been specifically planned for in advance to avoid the probate process. Here are some examples:

1. Assets in a Revocable Trust

A revocable trust is a key tool in estate planning that allows individuals to transfer their assets into a trust during their lifetime. Upon their death, the assets in the trust are distributed according to the terms of the trust without going through probate.

2. Jointly Held Property

Property held in joint tenancy with right of survivorship automatically transfers to the surviving co-owners upon death, bypassing probate. This includes real estate and bank accounts held jointly.

3. Accounts with Designated Beneficiaries

Certain accounts, like life insurance policies and retirement accounts (such as IRAs and 401(k)s), that have designated beneficiaries don't go through probate. The funds are directly transferred to the named beneficiaries.

4. Payable-on-Death (POD) Accounts

Bank accounts with a payable-on-death (POD) designation automatically pass to the named beneficiary upon the account holder’s death, avoiding probate.

5. Community Property with Right of Survivorship

In California, community property with right of survivorship is another way to avoid probate. This property automatically transfers to the surviving spouse without going through probate.

The Role of Estate Planning in Avoiding Probate

Effective estate planning is crucial in minimizing the assets that must go through probate. By utilizing various estate planning tools, individuals can make sure that their wishes are honored and that the probate process is as smooth as possible. Here are some strategies commonly used in California estate planning to avoid probate:

1. Creating a Revocable Trust

As mentioned earlier, a revocable trust allows you to transfer your assets into the trust during your lifetime. Upon your death, the assets in the trust are managed and distributed according to your instructions without the need for probate. This is a powerful estate planning tool for avoiding probate.

2. Joint Ownership

Holding property jointly with another person, especially with right of survivorship, sees that the property passes directly to the surviving owner without going through probate.

3. Designating Beneficiaries

For accounts like life insurance policies and retirement accounts, make sure that you have designated beneficiaries. These beneficiaries will receive the assets directly, avoiding the probate process.

4. Using Payable-on-Death Designations

Bank accounts and securities that have payable-on-death designations will pass directly to the named beneficiaries, bypassing probate.

5. Gifting Assets

Transferring assets through gifts during your lifetime can reduce the size of your estate and potentially minimize the assets that need to go through probate. However, it’s essential to consider gift tax implications and consult with a tax professional.

Potential Challenges and Solutions

Even with effective estate planning, there can be challenges that arise during the probate process. Here are some common issues and potential solutions:

1. Disputes Among Heirs

Family disputes can arise over the distribution of assets. Clear and comprehensive estate planning can help mitigate these conflicts by providing explicit instructions. An attorney can be a crucial tool during these negotiations as well.

2. Intricacies and Costs

Probate can be intricate and costly. Working with an experienced estate planning attorney can help traverse the process more efficiently and reduce associated costs.

3. Delays in Asset Distribution

Probate can take several months to years, depending on the difficulty of the estate. Utilizing estate planning tools like trusts can expedite the distribution process.

Contact an Estate Planning and Probate Attorney in Los Angeles Today

In California, knowing which assets must go through probate is a crucial part of effective estate planning. By understanding the types of assets that are subject to probate and implementing strategic planning tools, you can see that your estate is managed according to your wishes and minimize potential delays and costs. 

Estate planning isn't just about managing assets; it’s about providing peace of mind for yourself and your loved ones. By proactively addressing these aspects, you can make the process smoother and more manageable for everyone involved. If you’re located in Los Angeles, California or the surrounding areas of Sherman Oaks, Studio City, West Hollywood, and Beverly Hills, contact the Law Office of Rodney Gould today to schedule a consultation and get professional legal advice on your estate planning needs.