|
Legal & Tax Disclosure
ATTORNEY ADVERTISING.
This article is provided for general informational purposes only and does not constitute legal, financial, or tax advice. Reading this content does not create an attorney-client or professional advisory relationship. Laws vary by jurisdiction and are subject to change. You should consult a qualified professional regarding your specific circumstances. |
I recently spoke with a client, David, who came to me in a state of panic. He’d meticulously prepared a will years ago, but unfortunately, a crucial codicil – the one detailing how his brokerage account should be distributed – had been misplaced during a recent move. He’d spent weeks searching, but to no avail. Now, his family faced potentially significant delays and legal fees just to determine his wishes for that one account. This scenario, while frustrating, highlights a fundamental issue: understanding exactly what assets require probate, even with a seemingly comprehensive estate plan.
What Happens to Assets When You Die With a Will?
A will provides instructions for distributing your assets after your death. However, not all assets are governed by the will and subject to probate. Probate is the legal process of validating a will, identifying and valuing assets, paying debts and taxes, and ultimately distributing the remaining assets to your beneficiaries. The assets that must go through this process are those that don’t have designated beneficiaries or ownership structures that bypass probate.
Which Assets Typically Avoid Probate?
Many assets are designed to pass directly to beneficiaries outside of probate. These include:
- Strong>Jointly Owned Property: Property held with right of survivorship automatically transfers to the surviving owner(s).
- Strong>Payable-on-Death (POD) Accounts: Bank accounts, brokerage accounts, and even some insurance policies designated as POD pass directly to the named beneficiary.
- Strong>Transfer-on-Death (TOD) Registrations: Similar to POD, TOD designations on assets like stocks and bonds transfer ownership directly.
- Strong>Trusts: Assets held within a revocable living trust avoid probate entirely. The trustee distributes them according to the trust’s terms.
- Strong>Life Insurance Policies: Life insurance proceeds paid to a named beneficiary bypass probate.
What Assets Are Subject to Probate?
Assets that generally require probate include:
- Strong>Assets Titled Solely in Your Name: This is the core of probate assets. Real estate, vehicles, personal property, and bank accounts solely in your name are all subject to the probate process.
- Strong>Assets Without Designated Beneficiaries: If an asset lacks a POD, TOD, or beneficiary designation, it falls into the probate estate.
- Strong>Business Interests: Ownership in a business, like an LLC or corporation, can be subject to probate, depending on the ownership structure and operating agreement. As of March 2025, domestic U.S. LLCs are exempt from mandatory BOI reporting under the Corporate Transparency Act; however, executors managing foreign-registered entities must still file updates within 30 days to avoid fines of $500/day.
- Strong>Digital Assets Without Access Instructions: Without specific RUFADAA language (Probate Code § 870) in your Trust or Will, service providers like Coinbase and Google can legally deny your executor access to your digital assets.
The California Specifics: AB 2016 and the Small Estate Affidavit
California offers streamlined probate procedures for certain estates. For deaths on or after April 1, 2025, a primary residence valued up to $750,000 qualifies for a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). It’s important to understand this is a Petition that requires a Judge’s Order, not an Affidavit. However, to qualify, the decedent’s other non-real estate assets must typically remain below the separate $208,850 Small Estate limit. Be careful not to confuse this with the Small Estate Affidavit itself, which is strictly for real property under $69,625 – typically timeshares or vacant land.
The Impact of Property Taxes with Prop 19
When dealing with real estate in probate, remember the implications of Prop 19. Under Prop 19, heirs can only keep a parent’s low property tax base if they move into the home as their primary residence within one year and the home’s value is within specific limits.
The Importance of a CPA’s Perspective
After 35+ years as both an Estate Planning Attorney and a Certified Public Accountant, I can tell you that proper asset titling and beneficiary designations are crucial not only for avoiding probate but also for minimizing estate taxes and maximizing the step-up in basis for inherited assets. The step-up in basis can significantly reduce capital gains taxes when beneficiaries eventually sell those assets. A CPA can provide invaluable insights into tax-efficient estate planning strategies that a lawyer alone might miss.
What Happens If the Total Estate Exceeds the Small Estate Limit?
If combined ‘probate assets’ (excluding the AB 2016 residence) exceed $208,850 (the threshold effective April 1, 2025), they are subject to formal probate; a Will alone does not allow you to bypass this limit.
Protecting High Net Worth Individuals with the OBBBA
For my high net worth clients, the permanency of the increased estate tax exemption is a welcome relief. The 2026 ‘Sunset’ was averted by the OBBBA, which permanently increased the Federal Estate Tax Exemption to $15 million per person effective Jan 1, 2026.
How do California courts decide whether a will reflects true intent or creates ambiguity?
In California, a last will and testament operates within a probate system that emphasizes intent, clarity, and procedural compliance. When properly drafted, a will does more than distribute property—it creates legally enforceable instructions that guide courts, fiduciaries, and beneficiaries through administration with fewer disputes and less uncertainty.
To distribute property effectively, you must define what is in the estate, clarify who inherits, and understand how estate liabilities impact the final distribution.
For California residents, understanding how intent, authority, and compliance interact is one of the most effective ways to protect family harmony and estate integrity. A will that anticipates probate scrutiny is far more likely to be honored as written and far less likely to become the source of unnecessary conflict.
Resources for Asset Management & Transfer
-
Property Tax Reassessment: California State Board of Equalization (Prop 19)
This page details the “Base Year Value Transfer” rules. It explains that heirs can only avoid a property tax reassessment if the inherited home becomes their primary residence and the Homeowners’ Exemption is filed within one year of the date of death. -
Real Estate Probate (AB 2016): California Probate Code § 13151 (Petition for Succession)
The specific statute for the AB 2016 process. It outlines the requirements for using a court-approved “Petition” (not an affidavit) to transfer a primary residence worth $750,000 or less (gross value) for deaths occurring after April 1, 2025. -
Small Estate Affidavit: California Probate Code § 13100 (Personal Property)
Access the statutory language for the “Small Estate Affidavit.” This procedure is strictly for Personal Property (cash, stocks, vehicles) and is limited to estates with a total value of $208,850 or less (effective April 1, 2025). -
Federal Estate Tax Exemption: IRS Estate Tax Guidelines
The authoritative federal resource for estate valuation. It reflects the 2026 exemption increase to $15 million per person, which is critical for high-net-worth asset planning and determining if an IRS Form 706 is required. -
Unclaimed Assets: California State Controller – Unclaimed Property
The primary portal for executors and heirs to search for “lost” assets—such as forgotten bank accounts, uncashed dividends, and insurance benefits—that have been remitted to the State of California for safekeeping. -
Business/LLC Compliance: FinCEN – Beneficial Ownership Information (BOI)
The official portal for corporate transparency reporting. Most domestic and foreign entities (LLCs, Corps) must file a report. Executors must verify compliance, as failure to update control information within 30 days of death can result in federal civil penalties.
|
Attorney Advertising, Legal Disclosure & Authorship
ATTORNEY ADVERTISING.
This content is provided for general informational and educational purposes only and does not constitute legal, financial, or tax advice. Under the California Rules of Professional Conduct and State Bar advertising regulations, this material may be considered attorney advertising. Reading this content does not create an attorney-client relationship or any professional advisory relationship. Laws vary by jurisdiction and are subject to change, including recent 2026 developments under California’s AB 2016 and evolving federal estate and reporting requirements. You should consult a qualified attorney or advisor regarding your specific circumstances before taking action.
Responsible Attorney:
Steven F. Bliss, California Attorney (Bar No. 147856).
Local Office:
The Law Firm of Steven F. Bliss Esq.43920 Margarita Rd Ste F Temecula, CA 92592 (951) 223-7000
The Law Firm of Steven F. Bliss Esq. is a practice location and trade name used by Steven F. Bliss, Esq., a California-licensed attorney.
About the Author & Legal Review Process
This article was researched and drafted by the Legal Editorial Team of the Law Firm of Steven F. Bliss, Esq.,
a collective of attorneys, legal writers, and paralegals dedicated to translating complex legal concepts into clear, accurate guidance.
Legal Review:
This content was reviewed and approved by Steven F. Bliss, a California-licensed attorney (Bar No. 147856). Mr. Bliss concentrates his practice in estate planning and estate administration, advising clients on proactive planning strategies and representing fiduciaries in probate and trust administration proceedings when formal court involvement becomes necessary.
With more than 35 years of experience in California estate planning and estate administration,
Mr. Bliss focuses on structuring enforceable estate plans, guiding fiduciaries through court-supervised proceedings, resolving creditor and notice issues, and coordinating asset management to support compliant, timely distributions and reduce fiduciary risk. |
