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Alternatives to Probate

Los Angeles Alternatives to Probate Attorney

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POWERS OF ATTORNEY: The Good, the Bad and the Ugly (Part 1)

A married couple does not need a Living Trust to avoid probate. They can avoid probate by owning all of their assets jointly with rights of survivorship. In California, on the issue of income taxes, the Living Trust offers absolutely no benefit over the Will. You can avoid paying estate taxes by preparing a Living Trust, otherwise known as an Inter Vivos Trust, but this is only necessary if your estate exceeds $5,000,000 in the year 2011 and going forward. The Living Trust is a revocable trust, which means you can change it at any time. Since you have the ability to make changes, state and federal tax law views it as if you were the owner and, therefore, the tax treatment is identical to property owned outside of the trust. Your Will may not, in fact, control the disposition of any of your property. The Will is only one way to transfer assets at death. Your estate may already be arranged to pass to your heirs by some form of "will substitute."

One common example of assets passing outside the Will is property that is owned "with rights of survivorship." When property is owned by two or more persons, it can be owned with a "right of survivorship." A right of survivorship means that when one of the co-owners dies, the surviving co-owner automatically becomes the sole owner of the asset. This is the case regardless of the terms of the deceased party's Will. To state it another way, property owned with rights of survivorship passes to the survivor by virtue of the way the property is owned and not under the terms of a Will. In California, property owned with rights of survivorship is called "joint tenancy."

Contracts that you make during your life are another example of how property can be directed at the time of your death. For example, life insurance death benefits pass in accordance with the contract you make with the insurance company. The insurance contract provides that the insurer promises to pay death benefits to the beneficiary designated in the policy. Therefore, just like assets owned with rights of survivorship, your Will has no effect on the disposition of life insurance death benefits. Individual retirement accounts (IRAs), employer-sponsored retirement plans and annuities follow the same idea. As with life insurance, all of these arrangements allow you to name a beneficiary to receive the amounts payable upon your death.

United States Savings Bonds present another example of how property can pass at death. These bonds can be registered with a so-called "pay on death" or "POD" provision. If titled is held in this manner, the bonds are yours while living, but at death they will automatically pass to the person you name as beneficiary. The so-called "pay on death" registration has long been available with savings bonds. Now, however, the law known as the Uniform Transfer On-Death Security Registration Act, permits the option for other bonds, stocks, brokerage accounts and mutual funds. This Act allows the owner of securities to register the title in "transfer-on-death" or "TOD" form. Like joint ownership with rights of survivorship, this "TOD" registration means a quick, probate-free transfer at death. Unlike joint ownership, "TOD" registration does not mean giving up partial control while you are alive.