How to Avoid Probate in California Even if You Don’t Have a Trust: Part 2
One of the reasons we take the time to plan ahead and create an estate plan is to reduce or eliminate the delays and costs of a California probate. However, and despite best efforts, we are sometimes left with having to deal with probate – a court-supervised process that allows an estate’s representative to wrap up final affairs and distribute assets. While California requires probate in some circumstances, there are alternatives, which we’ve discussed previously.
This article will address the different alternatives to transfer probate property in California after a property owner’s death to the extent they are available. If you haven’t had a chance to check out our probate practice, you can do so here. That section includes details of a California probate and how it works.
Key Takeaways
Probate can be an expensive, long, and complex process
Even if you don’t have a trust, there are alternatives to avoid probate in California
HOW TO AVOID PROBATE IF YOU DON’T HAVE AN ESTATE PLAN
Family Allowance Petitions
A family allowance petition provides for short term family support payments pending estate administration (Cal. Prob. Code §§ 6540 to 6545). The decedent’s family members statutorily entitled to reasonable family support payments are the decedent’s:
Surviving spouse.
Minor children.
Dependent adult children with disabilities that prevent their gainful employment.
(Cal. Prob. Code § 6540(a).)
Any interested person may bring a petition to set a family allowance (Cal. Prob. Code § 6541(a)). The court may enter a family support order on an ex parte basis if the petitioner is statutorily entitled to an allowance, otherwise a noticed hearing is required (Cal. Prob. Code § 6541(b), (c)). Once granted, the allowance continues until the entry of the order for final distribution or, if the estate is insolvent, one year after the issuance of letters (Cal. Prob. Code § 6543). All costs incurred in a family allowance petition are charged against the estate (Cal. Prob. Code § 6544).
For more information about family allowance petitions, see schedule a strategy session.
Spousal Property Petitions
California allows transfer of real and personal property to the surviving spouse by affidavit or an expedited petition procedure (Cal. Prob. Code §§ 13600 to 13606 and 13650 to 13660). Either allows transfer of the surviving spouse’s testate or intestate share of the estate without formal probate administration (Cal. Prob. Code § 13500).
A spousal property petition is quicker and less expensive than formal probate. Sometimes this is considered as an alternative to a formal estate plan when dealing with married couples without children and holding only community property.
Homestead Exclusions
Any interested person may request a court declaration of a probate homestead. It confirms the rights of the surviving spouse and minor children to use and enjoyment of the family dwelling, family wearing apparel, household furnishings, and any other property exempt from enforcement of a money judgment. (Cal. Prob. Code §§ 6500 to 6615.)
The family’s use and enjoyment of the homestead property continues until sixty days following the filing of the estate’s inventory and appraisal (Cal. Prob. Code § 6500). Thereafter, any interested person may petition the court to set aside the probate homestead (Cal. Prob. Code §§ 6520 to 6528). The set aside may last as long as the period of minority of a child or the lifetime of the surviving spouse (Cal. Prob. Code § 6524).
Community property and jointly owned spousal property is selected first for probate homestead. However, the decedent’s separate property or any property of an unmarried decedent is subject to a probate homestead. (Cal. Prob. Code § 6522(a).) Only properties in which a third party holds a right to possession, except for inherited or intestate interests, are excluded from homestead selection (Cal. Prob. Code § 6522(b)).
Homestead set-asides reduce testate and intestate beneficiaries to remainder persons (Cal. Prob. Code § 6524). However, homestead property remains liable for claims against the estate, subject to the homestead right. This means that the property is exempt from any claim subject to a homestead exception, except for claims secured by liens on the property. (Cal. Prob. Code § 6526.)
Probate homesteads are a double edged sword in estate planning. They potentially shield estate assets from creditors in favor of the decedent’s spouse and minor children but provide an avenue for disinherited parties to claim an interest in the estate.
Married couples or unmarried individuals with minor children may wish a simple will rather than a trust for the asset protection qualities of the probate homestead. A probate homestead shields some of the decedent’s assets from creditors in a similar fashion as a creditor executing a money judgment. However, a probate homestead does not reach property held in a revocable living trust because the third party’s interest is not created by will or intestacy.
On the other hand, individuals expressly disinheriting minor children or spouses are better served by a trust. A disgruntled spouse or child can easily use a probate homestead to obtain temporary rights to the decedent’s property not subject to trust administration.
Transfer of Vehicles and Vessels
Vehicles Registered with the DMV
The Department of Motor Vehicles (DMV) handles transfers of automobiles and other vehicles following the death of the owner (Cal. Veh. Code § 5910.5), including the following:
Most mobile homes and commercial coaches (Cal. Veh. Code § 396).
Motor homes (Cal. Veh. Code § 415 and Cal. Health & Safety Code § 18010).
Camp trailers (up to certain dimensions) (Cal. Veh. Code § 242).
All-terrain vehicles (ATVs) (Cal. Veh. Code §§ 38010 and 38012).
Movable water vessels that are:
motor-driven or sail-powered; or
more than eight feet and less than 30 feet in length (Cal. Veh. Code §§ 9840 and 9873).
The Department of Housing and Community Development (HCD) handles the transfer of certain manufactured homes, large mobile homes, commercial coaches, camp trailers or trailer coaches, truck campers, all floating homes, and other property registered with the HCD (Cal. Health & Safety Code §§ 18010 and 18075 to 18079).
Vehicles in Decedent’s Name Only
If a vehicle or vessel is registered solely in the decedent’s name and is not registered in a “transfer on death” form, the successor in interest may transfer title by a declaration procedure, similar to that used for small estates under Sections 13100 to 13116 of the California Probate Code. The DMV has its own affidavit form for these transfers (see DMV: Affidavit for Transfer Without Probate, California Titled Vehicle or Vessels Only).
The transferee should present the DMV with the following:
A certificate of ownership.
A certified copy of the death certificate of the owner and the names and addresses of any other heirs or beneficiaries, if required by the department.
A current registration or certificate number of the vessel.
A DMV Statement of Facts, the section entitled “Statement for Use Tax Exemption” (Form REG 256), if the transfer is between family members.
The registration fee.
A smog certificate requirement, unless an exception under Section 4000.1(d)(2) of the California Vehicle Code applies or the vehicle is exempt from the smog certificate requirement.
An Affidavit for Transfer Without Probate, California Titled Vehicle or Vessels Only (Form REG 5).
A declaration under penalty of perjury stating the information required under Sections 5910(b)(2) and 9916 of the California Vehicle Code, which includes the date and place of the decedent’s death, as well as statements that:
no probate proceedings are pending;
the declarant is entitled to the vehicle or vessel; and
there are no unsecured creditors of the decedent with claims that have not been paid or discharged.
The transferee receiving the vehicle is liable both:
To the same extent as a person receiving property under an affidavit under Section 13100 of the California Probate Code for the decedent’s unsecured debts.
To a claimant with a superior right to the property and must restore the vehicle to the estate if probate proceedings are initiated.
(Cal. Veh. Code §§ 5910(c) and 9916.)
Joint Tenancy and Transfer on Death
A vehicle registered in the name the decedent and another person, evidenced on the certificate of ownership by the use of the word “or” between each person’s name, is deemed to be held in joint tenancy (Cal. Veh. Code §§ 4150.5(a) and 5600.5).
To have the ownership certificate and registration card of an automobile held in joint tenancy issued in the name of the surviving owner, the surviving owner should provide the following documents to the DMV:
A certified copy of the deceased joint tenant’s death certificate, if required.
The ownership certificate properly signed in the appropriate places on the reverse side by the surviving owner.
The registration card.
Statement of Facts (Form REG 256).
A certificate of compliance with the smog-pollution control law unless the decedent is the parent, grandparent, sibling, child, grandchild, spouse, or registered domestic partner of the surviving joint tenant (Cal. Veh. Code § 4000.1(d)(2) and Cal. Fam. Code § 297.5).
Finally, ownership of a vehicle or vessel may be held in beneficiary form that includes instructions to transfer ownership of the vehicle to a designated beneficiary on the death of the owner (Cal. Veh. Code §§ 5910.5 and 9916.5).
The surviving beneficiary may have ownership transferred by presenting the DMV with the following documents:
The ownership certificate and registration card, if available.
A declaration under penalty of perjury stating the date and place of the owner’s death and that the declarant is entitled to the vehicle as the designated beneficiary.
A certified copy of the death certificate if required by the department (Cal. Veh. Code § 5910.5(e)).
For more information on handling DMV matters of a deceased person, contact the firm for a consultation.
WHAT STEPS SHOULD I TAKE IF I WANT TO USE AN ALTERNATIVE TO PROBATE IN CALIFORNIA?
First, you’ll want to assess your need for asset protection. Whether you need asset protection planning is a function of your potential exposure to lawsuits. In assessing your need for asset protection, consider the following as you decide your needs: are you employed in a professional activity that makes you potential defendant; have you been sued before; or are there any gaps in your liability insurance or the limits of your policy?
Second, make sure that you plan in advance and before any trouble starts. The best time to engage an asset protection planning is when things are going smoothly. Once you’ve been sued, or threatened with litigation, it’s likely too late to shield your assets.
Third, work with an asset protection attorney. Asset protection is a complex field and only and an attorney skilled an asset protection planning can adequately assist you. If you're ready, and you have assets that you would like to protect with a combination of estate planning and asset protection strategies, we have a solution for you. Ask about our Layaway Payment Plan, which is a pay-as-you-go option for those on a tight budget. If you’d like guidance and assistance with creating comprehensive estate plans, schedule a strategy session today; we're happy to help.
Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.
At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.
On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.
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