Other Methods to Avoid Probate

Avoiding Probate for Specific Assets
Drawbacks of Joint Tenancy
Small Estates

As mentioned several times in the respective context, having a living trust is not the only way to avoid costly probate. Estate planning attorneys, like Rinne Legal in San Francisco, Oakland, Fairfield, Walnut Creek and Sacramento will therefore use other instruments besides a living trust to match all your estate planning needs.

Avoiding Probate for Specific Assets

In general all assets that are practically held by a third party and that allow to designate a specific beneficiary usually do not go through probate. All you have to do is to name a beneficiary who then receives the funds upon death of the owner.

Such are:
  • Pay-on-death-accounts (available for bank and brokerage accounts and some government securities)
  • Individual retirement accounts (IRA, Roth IRA, SEP-IRA, 401(k), 403(b))
  • Life insurance (has to go through probate if the estate is named as beneficiary. Therefore it is usually better to name a real person, e.g. your spouse)
  • Community Property with the right of survivorship (in Arizona, California, Nevada, Texas, Washington and Wisconsin)
  • Transfer-on-death-deeds (good for real estate in Arizona, Arkansas, Colorado, Kansas, Missouri, Montana, Nevada, New Mexico, Ohio and Wisconsin)
Drawbacks of Joint Tenancy

Another probate avoiding device, that is commonly used is the Joint Tenancy. Property that is held in joint tenancy is owned by two or more persons in equal shares (only Connecticut and Vermont allow unequal shares). If one of the tenants dies, his share will automatically be owned by the surviving tenant(s) (right of survivorship). The share cannot be left to any other person.

One major disadvantage about joint tenancy is that once somebody is made a co-owner in joint tenancy it cannot be changed without that person’s consent any more. In a living trust by contrast, the beneficiary, who effectively should receive the respective property upon death of the grantor, can be exchanged at any time.

Furthermore the new joint tenant in fact owns his share of the property. That means it can be sold or mortgaged without consent of the former sole owner. In addition the new half-owner’s asset belongs to the new half-owners estate and can therefore be subject to claims of his creditors. Besides, unlike in most living trusts there is no regulation regarding the incapacity of the grantor in the legal instrument of joint tenancy. Finally the transfer could eventually be subject to gift taxes.

Therefore in most cases transferring property to a well set up living trust instead of putting it into joint tenancy status is preferable.

Small Estates

In most states there is a simplified probate procedure for estates that do not exceed a certain value. The amounts vary, but sometimes even estates worth hundred thousand dollars qualify for this fast track procedure. Also sometimes probate is not necessary at all if the estate is worth less than a specific amount.

For example in California there is an affidavit procedure. No court is involved in it. 40 days after the decedent has died, the legal heir can set up a declaration (affidavit), claiming a certain piece of property. The declaration may then be used to claim the property from the current holder. The legal heir is that person, that the decedent designated in a rightful will or if no will has been left, the person according to the Californian intestacy regulations.

Several assets may all be included on one affidavit, or a separate affidavit may be used for each. If more than one person is entitled to inherit a particular asset, all beneficiaries must sign a single affidavit.

In California only estates, that do not exceed $100,000 in total current gross fair market value may be claimed with affidavits. Some assets do not count towards this threshold. These are
  • Vehicles and other state-registered property
  • Unpaid salary (within certain limits)
  • Joint Tenancy interests
  • Pay-on-death accounts
  • Assets in a living trust
However there is a major restriction: Only personal property that is not real estate qualifies for this specific affidavit procedure. If the decedent owns any piece of real estate that is not held in joint tenancy or transferred to a living trust, it has to go through another procedure. There is also a special procedure for small value real property (up to $20.000) in California.

The affidavit is to be signed under the penalty of perjury and the declarant has to assure that the contents of the declaration are true. A certified copy of the decedent's death certificate is required to be attached to the affidavit additionally. Although the Probate Code states that a declaration under penalty of perjury is sufficient, many institutions require a notarized affidavit. In that case the declaration should be notarized to avoid further complications. For further reference see sec. 13100-13115 of the Californian Probate Code.