What is a Will?
A will is the document which most everyone thinks of as the standard vehicle by which you can pass on the assets in your estate. It has served this purpose for hundreds of years. There are stringent formalities which must be complied with for a will to be valid. A will does not take legal effect until you die. A consequence of this is that to do its job in passing on your assets to your intended beneficiaries, the distribution of your estate will (where the assets of your estate exceed a certain value) be subject to a court supervised administration (a “probate”). This is a costly and time-consuming procedure. So it’s good to keep in mind that there are available some lawful “will substitutes,” the main ones being trusts, designation of beneficiaries under certain contractual obligations (such as life insurance policies, retirement plans, and individual retirement accounts [IRA’s]), pay-on-death bank accounts, and joint tenancy title holding (discussed in more detail elsewhere under “Will Substitutes”).
If you die without leaving a will or an appropriate will substitute (this is called dying “intestate”), and your assets exceed a specified value, your estate must still go through probate even though no will is involved. Further, when you die intestate, your estate may not pass to the person or persons you desired (had you made a will or will substitute). Instead, your estate passes in strict compliance with the statutory laws of intestate succession in a strict order of kinship priority.
Avoiding Probate By Will Substitutes
Since a probate is an expensive proceeding involving the pay-out of both an executor’s and an attorney’s fee, it is well worth looking at what are called the “will substitutes.” These will substitutes are fully legal means by which you can pass on your estate to your designated beneficiaries when you die without a probate being required.
Note that will substitutes “legally” pass on your property on your death. They are not shams to avoid the use of wills. Their use is specifically authorized by the California Probate Code under the heading of “Nonprobate Transfers.” Here are some of these will substitutes:
(1) An insurance policy on your life, which will pay out death benefits on your death to the beneficiary(ies) you designated in your policy;
(2) An Individual Retirement Account (“IRA”), under which its monies are paid on your death to the beneficiary(ies) you designated when you set up the account;
(3) An employee benefit (retirement) plan (with a pay-out like an IRA);
(4) A revocable living trust where the property you transferred into it will pass to the trust’s beneficiary(ies) when you die;
(5) A joint tenancy deed, by which your interest in real property, held asnjoint tenants, will automatically pass to the surviving joint tenant or tenants when you die;
(6) Community property, in which the deceased spouse’s one-half (1/2) interest will pass to the surviving spouse;
(7) A joint account at a financial institution, where the monies placed therein will pass on your death to the surviving party or parties to the account;
(8) A “P.O.D.” (pay on death) account with a financial institution, where the monies you deposited therein pass on your death to your designated payee or payees.
(9) A Totten trust account (named after an individual in a New York legal case) at a financial institution, where you make a deposit in your own name as trustee for another (or others) as your beneficiary(ies). On your death, the monies therein will pass to such beneficiary(ies).
In addition to these will substitutes, the California Probate Code also provides that personal property in your estate at your death may be transferred to the entitled beneficiary(ies) by means of a relatively simple “affidavit” procedure, where the gross value of your personal and real property located in California does not exceed $150,000. Also, real property in your estate at your death may be transferred to the entitled beneficiary(ies) by means of an affidavit procedure, where the gross value of such real property in California does not exceed $50,000. Furthermore, cars and other vehicles, boats, manufactured homes, mobilehomes, truck campers, floating homes, and a few other items of personal property are, under the California Probate Code, specifically excluded from calculating the $150,000 estate value referred to above.