What Are Non-Probate Transfers?
A non-Probate transfer of property belonging to a decedent generally occurs by operation of law, or as per Contract.
Here are a few examples of non-Probate transfers:
One of the most well-known ways to avoid Probate is by placing your property (real and personal) into a living Trust during your life. Such Trusts are known as “inter vivos” (or, "living") Trusts because they are established during your life (i.e., "inter vivos").
Trust Administration is much less expensive and much more efficient than Probate administration. It affords complete privacy. Conversely - most everything is public record in Probate Court. Trusts permit “parenting from the grave” by designing the timing and amounts of distributions from the trust in a particular way, depending on the beneficiaries' circumstances.
Trusts also offer a number of asset protection provisions for their Beneficiaries to safeguard the inheritance and protect your beneficiaries from themselves (in the event of substance abuse dependence, special needs or incapacity), and protect the beneficiaries from their creditors.
Notably, Trusts are critical when their beneficiaries are minors (under age 18) as minors cannot directly inherit (minors can only inherit via another court case - a Guardianship of the Minor's Estate). As such, naming minors as beneficiaries on bank accounts or life insurance policies would also require that a Guardianship for the Minor's Estate be pursued in court; while having the assets placed in Trust instead, affords seamless access to such trust assets by the successor Trustee - to be used for the benefit of a minor beneficiary (no Guardianship needed).
Right of Survivorship
Joint tenancy is one example of ownership that passes by right of survivorship, directly upon the death of one joint owner.
For example, real estate owned in Joint Tenancy passes to the surviving joint tenants by right of survivorship, outside of Probate, and outside of a Will or a Trust (it passes by operation of law). In California, community property (property acquired during marriage) is also subject to right of survivorship.
Therefore, a surviving spouse will be able to take ownership of community property without formal Probate - provided the proper language is used on title of such property (namely, "as community property with right of survivorship"). However, on the surviving spouse's death (unless placed in Trust), such property would trigger Probate.
Life Insurance Policies
Life Insurance policies are contracts whereby on the death of the insured, a death benefit is paid to a named Beneficiary. Such assets do not go through Probate, so long as the named Beneficiary survives the insured.
As noted above, minor beneficiaries (persons under age 18) cannot gain access to a life insurance death benefit until they turn eighteen. In that case, a legal Guardianship of the Estate of the Minor must be set up, in order to access a death benefit left to a minor prior to the minor's turning 18. Guardianship is in and of itself an expensive and lengthy court case, and remains open with the Court until the minor turns 18 years of age.
Payable-on-Death (“POD”) and Transfer-on-Death (“TOD”) Designations on Bank or Retirement Accounts
One is generally able to designate a “pay on death beneficiary” on his or her bank accounts or retirement accounts. Upon death, the funds in the account can be collected directly by the designated beneficiary without Probate, provided that the beneficiary survives, and that the beneficiary is over age 18.
Note that such beneficial interest becomes vested at the time of death, and any creditors of such named beneficiary will be able to attach such inherited assets to satisfy a judgment, etc.
This can be avoided if instead of naming beneficiaries on your accounts, the accounts were owned by a living Trust with creditor protection provisions safeguarding your beneficiaries' inheritance from their creditors, divorce, or other special circumstances that may jeopardize such inheritance.
How We Can Help
This is not a comprehensive list of the ways property can be transferred outside of Probate. When you retain the Law Offices of Maria N. Jonsson, PC we will help you identify and implement effective legal strategies to plan for your estate and your legacy.