Avoiding Probate and Passing Real Property to Your Heirs
We all hope that after passing, our property will pass to the person or persons we choose. But how do we ensure that will be the case?
In California, the most efficient way to avoid probate is to create a revocable living (or inter vivos) trust. Once the trust is formed, all of your real property and other assets should be owned either directly or indirectly in the name of the trust. Upon your death, the trust (along with everything owned by it) bypasses probate court process and passes to your named beneficiary.
A revocable living trust will allow you to maintain control of your property during your lifetime, but swiftly transfers that property to your named beneficiaries upon death. Further, upon your incapacity your named successor trustee will be able to manage the assets of the trust for your benefit. A trustee is charged with the legal duty to manage property within the trust according to the terms of the trust.
Why should you avoid probate?
You can also use a last will to name beneficiaries to your property. However, in California if only a will is in place, most assets owned at death will pass through probate court before being transferred to beneficiaries. This is both expensive and time-intensive.
The probate process can last anywhere from several months to several years, depending upon the complexity of the estate and any challenges that arise. In California, there are statutory court fees associated with probate that govern the executor and attorney fees. The probate fees are based upon the gross value of the assets that are part of the probate estate:
For a modest estate worth $300,000, the probate fees could be as much as $18,000. Considering the value of real estate in southern California, it is not hard to imagine probate fees of $40,000.00 or more. Again, when determining the value of your estate, the court will use the gross value of your home, not the equity or net value of the home. Therefore, if your home has a gross value of $600,000, the full $600,000 will be considered with respect to probate fees, even if you have a $450,000 mortgage and only $150,000 of net equity. This could put beneficiaries in a position where they may have substantial probate costs even if the net value of the estate is low. Your beneficiaries may then be forced to sell the home in order to pay the probate fees.
For more information on correctly transferring your property to your heirs via a trust, contact our estate planning attorney. We can help to ensure that your wishes are followed.