Some probates are foreseeable well before they occur. Consider an elderly individual who owns assets in her own name with a total gross value that exceeds the threshold for probate (presently $184,500). Unless such assets are held in a living trust and/or death beneficiary accounts then a probate will be required when she dies. Probate becomes increasingly foreseeable, in such cases, the closer a person is to death.
Less foreseeable probates, however, can catch people off guard. Let us discuss.
First, consider a married couple that owns all assets jointly with right of survivorship. Unless they are both senior citizens, it is likely that they may reasonably expect that the surviving spouse will have ample opportunity and ability, after the death of the first spouse, either to get all real property assets into a living trust and/or to sell real property assets and place the proceeds into accounts with death beneficiaries.
However, sometimes the foregoing gamble does not work out. For example, it is possible for a common accident or illness to take the lives of both spouses together. Typically, one spouse will survive longer than the other spouse and be declared the surviving spouse. If so, the estate of the second to die spouse is more likely then to have a gross value in excess of the then existing threshold for a probate.
Otherwise, if it is unclear which spouse survived then each spouse may be deemed to have survived the other spouse for purposes of succession to the couple’s assets. In such case, all assets titled as joint tenancy assets are divided equally between the two estates.
Sometimes, this halving of the joint tenancy assets may be sufficient such that neither deceased spouse’s estate exceeds the probate threshold. Otherwise, two probates may each be required to transfer each spouse’s own estate to their beneficiaries under each spouse’s will, if any, or to each spouse’s surviving heirs (e.g., children).
Second, consider an individual who has a small estate, i.e., under the probate threshold, but then inherits sufficient assets to have an estate that exceeds the probate threshold. That individual may never have considered the need for estate planning.
However, if the individual does not transfer the inherited assets into a living trust and/or into designated death beneficiary accounts, after receiving such assets, then that individual’s own death may trigger an unexpected probate.
Sometimes probate is unavoidable, such as when the individual has not yet received the full distribution of their inheritance and so could not possibly have done anything to place such assets outside probate. However, having one’s existing assets outside one’s probate estate reduces the risk and the magnitude of any probate.
Third, consider an individual who names primary death beneficiaries to Pay on Death bank accounts, life insurance policies, and/or Transfer on Death brokerage accounts. If the named primary death beneficiaries do not survive the account holder then does the account designate alternative (backup) death beneficiaries?
If not, or if the alternative death beneficiaries are also deceased, then the gift of such assets by way of the death beneficiary designation form will lapse (fail). The lapsed gift is then usually kicked into the deceased owner’s estate; the enlarged estate may exceed the probate threshold.
People do not plan to fail, but people do fail to plan. By not getting one’s affairs in order at one’s leisure, when there is no compelling reason to do so, a person is taking an unnecessary risk which may lead to an unexpected probate that catches their surviving family members off guard and leads to unintended results.
The foregoing discussion is not legal advice. Consult a qualified estate planning attorney for fact specific legal guidance. Dennis A. Fordham, Attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.
“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”