Probate is the court-supervised procedure for settling a deceased person’s estate. It typically involves authenticating the will, notifying heirs and creditors, inventorying and appraising estate assets, resolving debts or disputes and distributing property according to the decedent’s wishes or, absent a will, under state law. The process can be time-consuming, complicated and quite expensive, with court fees, attorney fees and other costs that can erode the value of the estate.

Fortunately, there are several legally valid ways to transfer property interests outside the probate process. Here are the most common types of probate-exempt property interests:

• Joint ownership with rights of survivorship — Property held as joint tenants with rights of survivorship, or as community property with right of survivorship between spouses, bypasses probate entirely. When one co-owner dies, the property automatically passes to the surviving owner(s) by operation of law. This method is often used for holding real estate. The key to probate avoidance lies in proper titling: the deed, account, or certificate must specifically state that right of survivorship is conveyed.

• Transfer-on-death (TOD) and payable-on-death (POD) designations — For real estate in California, a property owner can execute a transfer-on-death (TOD) deed, naming one or more beneficiaries who will automatically receive the property upon the owner’s death, without probate. For bank or brokerage accounts, payable-on-death (POD) designations allow the holder to name beneficiaries who receive the funds directly when the holder passes away.

• Life insurance policies and life insurance trusts — Death benefits from life insurance policies are generally not subject to probate when a valid beneficiary is designated. The proceeds are paid directly to the beneficiary. If the policy is owned by a properly structured life insurance trust, this also removes the proceeds from the insured’s taxable estate.

• Retirement accounts and plans — Retirement assets, such as IRAs, 401(k)s, and pensions, also pass outside probate to beneficiaries that are named. Upon the account holder’s death, the named beneficiaries present proof of death and receive the account in accordance with federal and state laws. Lack of a designated beneficiary or listing the estate as beneficiary could send the asset into probate, so careful attention to these designations is necessary.

• Revocable living trusts — Creating and properly funding a revocable living trust is a reliable probate-avoidance mechanism widely used in California. A trust is a legal entity that holds legal title to your assets while allowing you to retain control of the assets during your lifetime. Upon death, the trust property passes according to the trust’s terms, administered by a chosen successor trustee, without court intervention. 

Correct titling of assets and clear beneficiary designations are essential, and you should periodically review and update these arrangements to ensure they continue to reflect your intentions. Consulting a knowledgeable California estate planning attorney can help maximize probate avoidance strategies and promote the smooth and efficient transfer of your property to your intended heirs.

At Favaro, Lavezzo, Gill, Caretti & Heppell, PC in Vallejo, we help people with all aspects of estate planning throughout Solano, Contra Costa and Napa counties. Call us at 707-674-6057 or contact us online to arrange a free initial consultation.