Upon death in California, anything that you own which passes through your will goes through the process of probate. If the total of these assets is worth $150,000 or less, an inexpensive and quick Simplified Probate process is followed. However, if total assets are worth more than that, the state of California mandates the probate attorney fees, which can be quite substantial. Here are the current mandated probate rates:
4% of the first $100,000 of the gross value of the probate estate.
3% of the next $100,000.
2% of the next $800,000.
1% of the next $9 million.
.5% of the next $15 million.
As you can see, this can quickly become very expensive, especially considering the value of real estate in California. A great way to avoid probate, and to provide for other estate planning needs, is to work with an estate attorney to set up a Living Trust and transfer these assets into this Trust. However, this may not always be the best approach. This may be the case for a single person with no children who has a relatively small and simple estate.
As of the beginning of 2016 another option is now available in California. A Revocable Transfer on Death(TOD) Deed can be created that specifies the beneficiary or beneficiaries of certain types of real estate upon death. You can implement a Simple Revocable Transfer on Death Deed for your house by signing this deed with a notary and filing it with your county recorder within 60 days. Note that this law is in a trial period which expires in 2021. However, TOD deeds in place prior to that time will continue to be valid.
The following types of real property are eligible for a Revocable TOD Deed, whether are not they are your primary residence:
- one- to four-unit residential dwelling units
- condominium units
- single tract of agricultural real estate consisting of 40 acres or less that is improved with a single-family residence
At this time, it is unclear whether the Revocable TOD Deed for property is also available for jointly owned property. This will be clarified in a future post.
A comprehensive estate plan that provides for the disposition of your assets and belongings is an important part of any financial plan. If you do not specify what happens to your assets, upon your death the intestate laws of the state will define the process, and this may not be what you would have wanted.
Working with an estate planning attorney is the best way to implement the correct estate plan for you and your specific needs. Many times, this may involve setting up a Living Trust. However, California’s Revocable TOD Deed may be a better approach when a trust will not be put in place. In either case, it is still wise to work with an estate attorney to assure such a deed is in your best interest.
Be aware that it is also possible to set up Payable on Death (POD) instructions for bank accounts, TOD instructions for brokerage accounts, and TOD instructions for automobiles at the DMV.