HOW WILL MY PROPERTY BE TRANSFERRED AT MY DEATH?
Transfer of your property on your death is controlled by the law of the State where you live, except that procedures for transferring real property (land) located in another State will be governed by the law of the State where the land is located. In California there are four different ways that property can pass to beneficiaries or heirs, depending on how your property is “titled”.
1. JOINT OWNERSHIP WITH SURVIVORSHIP RIGHTS: If property is titled as “as joint tenants,” or as “community property with rights of survivorship,” the property will automatically pass to the joint owner upon your death. No probate will be necessary; instead only a death certificate and perhaps an Affidavit of Death will be required. Any Will you may leave has no effect on property held in joint ownership with survivorship rights. Do not add someone to title to your property as a joint owner as an estate planning device without first discussing it with an attorney. A joint owner’s creditors may be able to reach the asset prior to your death; and joint tenancy ownership may reduce income tax “stepped up basis” benefits that would otherwise be available to your joint owner if they received the property from you via a different avenue. When the second joint owner dies, probate may be required if no further estate planning is completed.
2. BENEFICIARY DESIGNATION: You are allowed to sign forms designating beneficiaries for certain property, usually retirement accounts, life insurance, and bank accounts. There is also a new “Transfer on Death Deed” in California for putting a beneficiary on real property. The property will automatically pass to the designated beneficiary upon your death. No probate is necessary for property having a designated beneficiary; instead only a death certificate and completion of a Claim form. Any Will you may leave has no effect on property passing to a designated beneficiary. If you have young children, you may want to name a custodian for them in the beneficiary designation: for example, “John Doe, son, but if he is under the age of 18 then to Jane Doe as Custodian for John Doe until he attains age 18 under the California Uniform Transfers To Minors Act.” You may select any age between age 18 and 25 as a Custodianship ending age. If your minor child is designated as a beneficiary without a specified custodian, it would be necessary for a Court to appoint a Guardian for that minor child’s estate before payment would be made if you die while the child is a minor. If the beneficiary dies before you or at the same time, then probate may required if no further estate planning is completed.
3. PROPERTY HELD IN A TRUST: A revocable living trust is an estate planning device that allows you to name someone (called a Successor Trustee) to follow instructions you write into the trust for distributing the property that you placed into the trust after your death. A trust is created by a signed document, usually written for you by an attorney, and then you transfer your assets so title is held by the Trustee of your Trust. A Trust is not probated; and the transfer to beneficiaries costs less and is usually completed in less time than Probate. A trust also provides instructions for the management of the property that you have transferred to the trust in the event of your incapacity, thus avoiding the expense of Conservatorship proceedings. A trust usually has alternate beneficiaries, so that there is not a problem if your beneficiary dies before you.
4. PROBATABLE ESTATE: Any property that is not held in one of the 3 ways listed above (or if the named beneficiary or joint tenant dies before you) is part of your estate that could be subject to probate. If you leave a Will, this property is transferred as specified in your Will. If you don’t leave a Will, this property passes to your nearest relative(s) as specified in State law (called the Intestate Law). It would only pass to the State of CA if you don’t leave a Will and none of your relatives can be identified or located. If the total value of all your property passing via this avenue #4 is less than $150,000, no Probate will be necessary; instead only a Probate Code Affidavit and death certificate will be required. If the total value of your entire property passing via this avenue is more than $150,000, then formal Probate will be required. Probate requires a court case and is costly.
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