Which Assets Must Go Through Probate in California?
Understanding which assets must go through probate is crucial for effective estate planning and management in California. Probate is the legal process used to administer and distribute a deceased person’s estate, and knowing which assets are subject to this process can significantly impact how smoothly and efficiently an estate is settled. A probate attorney can provide valuable assistance in traversing this process.
In California, the probate process makes sure that assets are distributed according to the deceased's wishes or, if no will exists, according to state intestacy laws. This guide will explore the types of assets that typically require probate, including real estate, bank accounts, personal property, business interests, and unregistered securities, highlighting the role of a probate attorney in managing these assets effectively.
Probate in California
What Is Probate?
Probate is a court-supervised process for managing and distributing a deceased person’s estate. It involves validating the will (if one exists), appointing an executor or administrator, paying off debts and taxes, and distributing the remaining assets to heirs or beneficiaries. The probate process makes sure that the deceased’s assets are transferred according to their wishes or state law if no will exists.
Why Is Probate Necessary?
Probate is necessary to provide a clear legal process for the transfer of ownership of the deceased's assets. With the guidance of a probate attorney, this process makes sure that all debts and taxes are settled and that the assets are distributed according to the deceased’s wishes or, in the absence of a will, according to state intestacy laws. Additionally, a probate attorney helps resolve any disputes among heirs or creditors, providing a smooth and equitable administration of the estate.
Assets That Must Go Through Probate
Real Estate
If real estate is solely owned by the deceased and doesn't have a designated beneficiary or joint owner with the right of survivorship, it must go through probate. This includes personal residences, rental properties, and land.
For example, a house solely owned by the deceased, without a living trust or joint tenancy arrangement, will be subject to probate. The court will oversee the transfer of the property to the heirs or beneficiaries as specified in the will or by intestate succession.
Bank Accounts
Bank accounts held solely in the deceased's name typically go through probate. This includes checking accounts, savings accounts, and certificates of deposit (CDs). For example, a savings account solely in the deceased’s name without a payable-on-death (POD) designation or joint account holder will be subject to probate.
Personal Property
Personal property such as jewelry, art, antiques, vehicles, and collectibles, if held solely by the deceased, must go through probate. The court will oversee the distribution of these items according to the will or intestacy laws. For example, a collection of rare coins or valuable art pieces owned solely by the deceased will be included in the probate estate.
Business Interests
If the deceased owned a business as a sole proprietor or was a partner in a partnership, the business interests must go through probate. This includes ownership interests in privately held businesses or partnerships. For example, a small business owned solely by the deceased or a share in a family business partnership will be included in the probate estate.
Unregistered Securities
Stocks, bonds, and other securities held in the deceased’s name and not registered in the name of a beneficiary or joint owner must go through probate. For example, shares of stock in a company held solely in the deceased’s name will be subject to probate unless transferred to a living trust or payable-on-death account.
Assets That May Avoid Probate
Joint Tenancy Property
Assets held in joint tenancy with right of survivorship pass directly to the surviving joint tenant(s) and generally don't go through probate. A house owned in joint tenancy between the deceased and a spouse, for example, would pass directly to the surviving spouse without going through probate.
Living Trust Assets
Assets placed in a living trust don't go through probate. The trust's successor trustee will manage and distribute the assets according to the trust's terms. If a person transfers their home into a living trust, the home will be distributed according to the terms of the trust without probate.
Payable-on-Death Accounts
Bank accounts and securities with designated payable-on-death (POD) beneficiaries pass directly to the named beneficiaries without probate. A savings account with a POD designation to a family member, for example, will be directly transferred to that beneficiary upon the account holder's death.
Life Insurance Policies
Life insurance proceeds are paid directly to the named beneficiaries and don't go through probate. A life insurance policy with a designated beneficiary, for example, will result in the policy proceeds being paid directly to the beneficiary, bypassing probate.
Retirement Accounts
Retirement accounts such as IRAs and 401(k)s with designated beneficiaries are passed directly to the beneficiaries and don't go through probate. A 401(k) account with a designated beneficiary would be transferred directly to that beneficiary upon the account holder’s death.
Probate Process in California
Filing the Petition
The probate process initiates with the filing of a petition for probate in the local probate court, usually with the help of a probate attorney. This petition generally includes the deceased’s will, if available, along with other required documents. For instance, the executor or personal representative files the petition to commence the probate process, requesting court authorization to oversee the estate.
Appointing the Executor or Administrator
When a will is present, the court appoints the executor named in the document to oversee the estate, which involves managing probate assets and settling debts. In the absence of a will, the court designates an administrator to fulfill these responsibilities. For example, the executor appointed by the will is officially authorized by the court to handle all aspects of estate administration.
Creating Inventory and Appraisal
The executor or administrator is responsible for compiling a comprehensive inventory of the deceased’s assets and arranging for their appraisal to establish their value. For instance, the executor prepares a detailed list of probate assets, such as real estate, personal property, and business interests, and secures professional appraisals to confirm accurate valuation.
Resolving Debt Payment and Tax Filing
The estate must pay any outstanding debts and taxes before distributing the remaining assets to beneficiaries. This may include income taxes, estate taxes, and creditor claims. The executor uses estate funds to pay off any debts and settle tax liabilities before proceeding with the distribution of assets.
Distributing Assets
Once debts and taxes are settled, the remaining assets are distributed according to the terms of the will or, if there's no will, according to California intestacy laws. The executor distributes the remaining assets, such as real estate and personal property, to the beneficiaries as specified in the will or determined by state law.
Challenges and Considerations
Contesting the Will
Heirs or interested parties may contest the validity of the will or the appointment of the executor, which can delay the probate process. For instance, a family member may challenge the will’s authenticity or argue that the executor isn't fulfilling their duties properly.
Intricate Estates
Estates with significant assets or intricate financial holdings may face additional challenges, including lengthy probate proceedings and higher administrative costs. For example, an estate with extensive real estate holdings and multiple business interests may require legal and financial assistance to manage.
Probate Alternatives
Estate planning tools such as living trusts, joint tenancy, and beneficiary designations can help avoid probate and streamline the distribution of assets. Creating a living trust to hold assets can bypass probate and allow for a more efficient transfer of property to beneficiaries.
Address Your Questions With an Attorney
At Bochnewich Law Offices, we understand and respect the personal and emotional aspects of preparing for your family’s future. We’re dedicated to being responsive to your questions and taking a hands-on approach to address all your concerns. In California, certain assets, such as real estate, bank accounts, personal property, business interests, and unregistered securities, must go through probate. By understanding which assets are subject to probate, we can assist you with effective estate planning and administration.
While probate provides a structured process for managing and distributing an estate, there are various strategies and legal tools available to minimize or avoid probate altogether. Serving Southern California, including Riverside County, Los Angeles County, San Bernardino County, Orange County, and San Diego County, our probate attorney team is here to provide valuable guidance and make sure that the probate process is handled efficiently and per California law. Contact Bochnewich Law Offices today to schedule a consultation.