The Many Forms of Nonprobate Transfers

Many Americans, even those with children, die without a will. State intestacy laws may provide a framework for how a decedent’s asset should be divided amongst his or her heirs. However, many know that it might be wise to avoid the probate process because it ties up property for months and it can be very costly.[1] There are other processes in place for transferring remaining assets after death. In California, there are several options to transfer assets without probate administration.

Here are a few of these options for transferring assets at death, while avoiding probate: 1) joint tenancy, 2) community property with right of survivorship, and 3) California Probate Code Section 13100 et seq.

• Joint Tenancy
  • Pros
    • Joint tenancy has a right of survivorship.
    • Each joint tenant owns an identical percentage of the entire asset.
    • Clearing the title to a joint tenancy upon the death of a joint tenant is often a straightforward process.
    • Joint tenancy may be severed unilaterally.
  • Cons
    • The new joint tenants will have the power to manage the asset along with the original owner, which may not be the intention of the original title owner.
    • The transfer may have gift tax consequences.
• Community Property with Right of Survivorship[2]
  • Pros
    • Real or personal property may be owned by a married couple as community property, but with the survivorship features of an asset held in joint tenancy.
    • Community property with right of survivorship is normally more favorable than joint tenancy ownership since both the decedent’s and the survivor’s half of the asset receive a basis adjustment equivalent to the fair market value of the asset at the death of the first person to die. When the surviving spouse dies later still holding the asset, the basis will receive another adjustment to the fair market value.
    • A spouse can establish an account that provides for a nonprobate transfer at the spouse’s death to a non-spouse beneficiary.
    • There is no gift tax consequence.
  • Cons
    • A spouse may be able to act alone to revoke the right of survivorship.
• Probate Code Section 13100 et seq.
  • Pros
    • If the total gross value of the decedent’s real and personal property in California does not exceed the amount of $150,000, the decedent’s personal property may be conveyed by affidavit or declaration pursuant to Probate Code Section 13100 et seq. and no court involvement will be required.
  • Cons
    • Probate Code Section 13100 et seq. is only available if no probate proceeding will be commenced for the decedent’s estate or the personal representative of the decedent’s estate consents in writing to the transfer of property through this method.
    • May not be used to transfer real property, regardless of the value of real property.

These are only a few of the methods to avoid probate administration of a decedent’s estate. In planning for nonprobate transfers, individuals should be aware of the pros and cons of their options and anticipate which option works best for their needs. Individual should also be aware of issues regarding liquidity and the intended beneficiaries. Even so, many can benefit from the use of the various nonprobate transfers.

Estate planning is a highly complex area of law. If you are interested in nonprobate transfers or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including nonprobate transfers, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.