Wills and probate

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Wills and probate

My husband has investments in his name only. He has no will. If he dies, will these investments have to go through probate?

Asked on May 24, 2009 under Estate Planning, California

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

Under California law, there are several mechanisms through which your husband's estate can avoid probate.  They are as follows:

LIVING TRUSTS: Assets owned through a living trust do not need to be probated.

JOINT TENANCY: If an asset is owned by two or more people as joint tenants, it will usually not be probated.  These assets can be identified by the words "joint tenants," or "in joint tenancy," "JT TEN," or similar wording. When a joint tenant dies, the other joint tenant takes 100 percent ownership of the asset.  This occurs regardless of the provisions of the will or trust of the deceased joint tenant.  In other words if a house is held in joint tenancy by persons A and B, and A dies, it doesn't matter what A's will said about the house because it will be owned 100 percent by B.  If this is what A and B intended, then joint tenancy might be beneficial to them.  Otherwise, they should use some other form of ownership, such as tenancy in common.

Note:  Joint tenancy is not recommended for assets that can increase in value, such as a residence, because the surviving joint tenant will not receive a "stepped up cost basis" to fair market value at the date of death of the other joint tenant.  Cost basis is used to determine capital gains.  For many homeowners, the cost basis is the price they paid for their home, plus any capital improvements that have been made.  The cost basis is subtracted from the selling price to determine the capital gains.  When a married couple owns an appreciated asset as community property, the surviving spouse will get a step-up in the cost basis to the fair market value at the date of death of the other spouse.  In other words, if the surviving spouse has to sell the residence, he or she is unlikely to have to pay any capital gains.  But if the residence is held in joint tenancy, it is more likely that some capital gains tax may be due.  The federal tax reform bill passed in 1997 allows the surviving spouse a capital gains exclusion of $250,000, but for some California residents, even this amount may not be enough to prevent payment of capital gains tax when a residence is sold. 

SMALL ESTATES:  The California Probate Code provides that probate estates of $100,000 or less do not need to be probated.  In some cases, the actual estate may be well in excess of $100,000, but the small estate law can still be used.  The reason is that many assets are not defined as probate assets, such as life insurance (unless it was payable to the estate), IRAs, 401Ks, assets held by a living trust, and joint tenancy assets.  The $100,000 amount is calculated by totaling all of the probate assets owned by the decedent.  Estates valued at less than $100,000 worth of probate assets are administered by preparing affidavits which are presented to the various institutions (banks, brokerages, etc.) that hold the assets.  The assets are then turned over to the person named as executor in the will, and distributed according to the will.  If there is no will, the assets are distributed according to the rules of intestate succession (in other words, to the nearest relatives of the deceased; typically spouse and children).

SPOUSAL PROPERTY PETITIONS:  If the decedent is survived by a spouse, the spouse can file a spousal property petition with the court.  The purpose of this petition is to change the titles of the assets to the surviving spouse's ownership.  The petition is a simplified probate, and takes much less time than a full probate.  Legal fees are usually much lower for this type of petition than a full probate.

As you can see this can be a very complicated area of the law.  It can also be an expensive one if done incorrectly.  You and your husband should really sit down with an estate planning attorney to go over all of your options.

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

The investments would have to go through probate whether or not he has a will.

A will would still be a good idea, though, especially if he has children from a previous marriage.  Everyone has an "estate plan," with or without a will -- but without a will, it's called "intestate succession," and I can't guarantee that you'd like it.

You need to talk to an attorney in your area about this, and one place to find a qualified lawyer is our website, http://attorneypages.com


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