You've heard it many times. Estate planning experts always say you need a living trust to avoid probate. But since you are clever, and you know you can outsmart those annoying lawyers, here's what you can do to avoid probate without using a living trust. Good luck!
1. Don't Have Many Assets
If you rent, and your assets are worth less than the California probate threshold of $184,500, your estate won't go through probate.
2. Use a Transfer on Death Deed for Your Home
California's Transfer on Death Dead promises a way to transfer your home at your death without probate and without a living trust. But beware. It's not as effective as you would hope.
A California Transfer on Death Deed must be notarized and signed by two witnesses.
When you die, your beneficiary must provide written legal notice to your heirs in accordance with the California Probate Code.
You cannot name a contingent beneficiary.
If your beneficiary dies before you, you must execute a new transfer on death deed to name a new beneficiary.
At your death, your beneficiary will be personally liable for your debts for three years.
Title companies may not want to issue title insurance until the three-year period is up, so your beneficiary will not be able to sell the property until then.
Read more on California Transfer on Death Deeds.
3. Name Beneficiaries on All of Your Accounts
Some banks and financial institutions will allow you to name transfer on death beneficiaries on your accounts. This is standard procedure for retirement plans and life insurance, where you need to name primary and contingent beneficiaries.
4. Be Willing to Give Control of Your Assets to Your Young Children
When we prepare living trusts for our clients, we usually include springing asset protection trusts for their children. Asset protection trusts meet two objectives. First, asset protection trusts allow someone you trust to manage your young and immature child's inheritance until he reaches a certain age. Second, asset protection trusts significantly protect your children's inheritance from divorce and lawsuits.
For additional reading on asset protection trusts click here.
If you rely solely on beneficiary designations and transfer on death designations, your children will receive their inheritance outright, not in a protected trust.
5. You Will Still Need a Will, Durable Power of Attorney, and Advance Health Care Directive and HIPAA
You will still need standard estate planning documents.
Will. A Will names your executor and beneficiaries, and if you have minor children, it names your guardians.
Durable Power of Attorney. A Durable Power of Attorney gives someone you trust authority over your assets if you become incapacitated.
Advance Health Care Directive and HIPAA. Advance Health Care Directive and HIPAA will give someone you trust authority to make health care decisions for you if you can't, and it will authorize them to talk to your doctors.
There is a way to avoid probate without a living trust. It's doable if you don't own real estate and if you have a very modest estate. It's not so easy if you own your home, have accounts worth more than the probate threshold, and you want to protect your children. And you will still need the essential estate planning documents - will, durable power of attorney, and advance health care directive and HIPAA. For most people, a living trust estate plan is a simpler and more reliable solution.