What Happens to Property When a Family Member Dies?
December 20, 2012
California has very specific laws that govern what happens to property belonging to someone who dies. While the process of estate administration is complicated, and, if not handled properly can be both time-consuming and expensive, a consultation with an estate planning attorney long before death is in sight can streamline the process and save the family lots of money in both fees and taxes.
Putting some property into a trust can bypass the probate process for that part of the property. This can reduce fees for property appraisal and estate administration often needed in court proceedings. A trust must be properly structured, of course, and has its own tax issues to sort out. If a trust is not properly structured or property is not properly transferred to the trust, the effort may be wasted. This is not a job appropriate for do-it-yourself efforts.
Some property can avoid going through the court probate process by being placed in joint tenancy with the right of survivorship. Many don’t realize that this can be done with bank accounts and some other property as well as with homes and other real estate. This is also true for community property with the right of survivorship. Such property transfers by operation of law to the surviving joint tenant or surviving community owner at the time of the first person’s death.
The proceeds of life insurance and funds in an IRA can also be simply designated on a beneficiary form and circumvent the probate process. Anything that passes through the probate estate is subject to the claims of the dead person’s creditors, such as final medical bills. Making life insurance or IRA funds payable to a person’s estate rather than to specific individuals can be a big mistake, resulting in the funds going to creditors rather than family members. To avoid mistakes like this, it’s not a bad idea to consult an attorney who focuses on estate planning and administration.
Source: Orange County Register, “Harper: A few things to know about probate rules,” Patrick Harper, Dec. 13, 2012