Probate is a formal process that settles a deceased person’s estate under the court’s supervision. In California, communal property or estates totaling $166,250 or less can avoid probate.
When your estate’s value exceeds the state’s threshold, you can consider the following strategies to keep it out of probate.
1. Create a trust
Assets you place in a trust are no longer part of your estate. Therefore, they do not go through probate when you die, and your beneficiaries can receive them immediately upon your death. Alternatively, you can determine a future date after your death when minor beneficiaries receive the assets you place in a trust.
2. Make gifts
California does not have a gift tax. In addition, the federal government allows individuals and spouses to make annual tax-free gifts up to $16,000 and $32,000, respectively, to any number of recipients. The lifetime limit is $12.06 million. You can keep the value of your estate below California’s $166,250 probate limit by making gifts before your death.
3. Make your accounts payable upon your death
Bank accounts, insurance policies and other financial accounts can bypass probate when you make them payable to a beneficiary upon your death. If that person predeceases you, you cannot change your beneficiary, and probate will be necessary. Therefore, it is advisable to name subsequent beneficiaries to ensure these accounts do not go through probate.
4. Make your property transferrable upon death
Any property you jointly own with someone else will automatically transfer to that person upon your death. Although state laws regarding property transfers are complex, it may be possible to name other beneficiaries for your property without probate.
A thoughtful estate plan can give you peace of mind and help those you leave behind avoid court time.