California Estate Planning Laws

The most important thing to know about estate planning is that it’s for everyone. Estate planning is not only for the uber-wealthy, but instead for anyone who wants to have a say in how things are handled if they become incapacitated and when they die. An estate plan is basically a set of instructions that you provide ahead of time. This article explores what an estate plan is, the different ways you can plan ahead, and some unique aspects of California law.

What Is an Estate Plan?

Your estate is all of the things you own (assets). This includes real property (real estate), personal property, retirement accounts, life insurance benefits, collections, business interests, and more. Digital assets, such as cryptocurrency, loyalty rewards, subscriptions, cloud storage, and your online presence, are also part of your estate.

Your estate plan is the collection of legal documents that work together to ensure your wishes are carried out if you become incapacitated or when you die. Having an estate plan in place often provides valuable peace of mind through the knowledge that family members and loved ones will be taken care of the way you’d want. California law provides several tools so that you can plan ahead of time how your assets will be managed if you become incapacitated and how they will be distributed after your death.

What Happens if You Die Without an Estate Plan?

If you don’t have an estate plan in place when you die, California’s intestate succession laws come into play. The probate court will distribute your assets according to the intestacy laws. Typically, this means half of your estate will go to your surviving spouse, with the remainder divided among family members. If you don’t have a surviving spouse, the court divides your estate among family members. This may mean your estate goes to distant relatives you’ve never met. Having an estate plan in place helps ensure that your loved ones get what you want them to.

Not All Estates or Assets Must Go Through the Probate Process

Probate is a shorthand way of describing the probate court’s oversight of the process that transitions the ownership of your assets after you die. As a general overview, the probate process is:

• Opening the estate (an interested petitioner asks the probate court to admit the will or, if there is no will, for letters of administration)
• Appointing a personal representative (“executor” if there is a valid will in place; “administrator” if there is no will in place or the will is declared invalid and the intestacy laws apply)
• Notifying creditors and heirs
• Gathering, inventorying, and appraising the assets (California often uses a probate referee for the appraisal process)
• Paying all the outstanding debts, including taxes
• Distributing the remaining property according to the will or according to intestacy law
• Closing the estate

The California probate courts have many functions. For example, they oversee the administration of estates and trusts, determine inheritance rights, resolve certain disputes, and protect minor children and incapacitated adults through guardianships and conservatorships.

There are many ways for your estate to end up in probate court. Examples include dying without an estate plan in place (intestate), your will and the size of your estate requiring formal probate, or your heirs or beneficiaries challenging your estate plan.

There are also a few ways to potentially avoid probate, including:

• Assets that are transferred into a revocable living trust during the owner’s lifetime avoid probate
• Certain small estates with a value below the statutory thresholds may pass to your heirs through an affidavit or summary petition
• Assets with beneficiary designations that include:
  • Payable on death (POD) designations, such as bank accounts, certificates of deposit
  • Transfer on death (TOD) designations, such as residential real estate, securities, brokerage accounts, and vehicles
  • Retirement accounts
  • Life insurance policies
• Real property, co-owned with right of survivorship as in joint tenancy or community property, may avoid probate

Why avoid probate? The California probate process meets the needs of many people, but the formal probate process takes time, often between nine and 18 months. In addition, probate can be costly. California law sets the personal representative fees and legal fees based on the value of the estate. The larger your estate, the more you may want to consider creating an estate plan that avoids probate.

Another consideration is that your will and other court filings are public record. This means that anyone can access the information.

Core Components of a Comprehensive Estate Plan

With a thorough estate plan in place, you can provide your family members and loved ones with all the important instructions you want them to follow. An estate plan is typically will-based or trust-based and supplemented with additional legal documents.

Will

In a last will and testament, the person making the will (testator) gives their property to the heirs named in the document. A formal will, also known as an attested will, is usually a printed document. It must be signed either by the testator or another person in the testator’s name. If the latter, it must be signed in the testator’s presence and at their direction. This can also be done by a conservator acting under a court order.

Two witnesses that ideally don’t have a financial stake in the will must attest that they witnessed the signing of the will or the testator’s acknowledgment of the will signing. This must occur during the testator’s lifetime, and they must understand that it is the testator’s will. An attested will does not need to be notarized to be valid.

California recognizes handwritten (holographic) wills if:

• The material provisions of the will and the signature are in the testator’s handwriting
• The language shows testamentary intent (this can be shown by extrinsic evidence, meaning evidence beyond the document itself)

Unlike a formal will, a handwritten will does not require witnesses. California law does not recognize oral wills (nuncupative wills). If you die with a will in place and your estate exceeds certain “small estate” thresholds, your estate will go through the full-blown probate process.

Trust

A revocable living trust (RLT) is often the foundation of a trust-based estate plan. It is an inter vivos trust (created during your lifetime) that holds, manages, and ultimately distributes your assets to your intended beneficiaries.

The settlor (also called the grantor or trustmaker) creates a trust and retitles assets in the trust’s name. Upon death, the RLT typically becomes irrevocable and assumes its own taxpayer identification number. Retitling the assets in the trust’s name and changing beneficiary designations, also known as “funding” the trust, is a crucial step. Any assets that aren’t owned in the revocable living trust must go through the probate process.

The settlor is usually the first trustee, meaning they administer and manage the assets, retaining control over them. When the settlor dies, the designated successor trustee assumes the role. The trust document provides all the settlor’s instructions about when and how to distribute the trust assets to the beneficiaries.

A revocable living trust can be a tool for both asset-protection planning and tax planning. Although a revocable trust generally does not shield assets from the settlor’s creditors, it can provide asset protection for a beneficiary by holding distributions in ongoing trusts rather than distributing them outright.

The structure can also facilitate tax planning. Examples include preserving step-up in basis at death, enabling marital or bypass trust planning for married couples, and coordinating estate tax strategies for larger estates. While California does not currently impose an estate tax, the federal estate tax will apply to estates valued above the current threshold.

If you have beneficiaries who might benefit from creditor protection, a trust-based estate plan might be a good option for you. This is also true if your estate hovers near the current estate tax exemption or would benefit from tax-planning strategies.

Additional types of trusts to be aware of for estate-planning purposes include:

• Pour-Over Wills: A pour-over will directs that any assets still held in an individual’s name at death be transferred into their RLT
• AB Trust (Marital and Bypass Trusts): An AB Trust is a tool for married couples that can maximize the federal estate tax exemption by dividing trust assets after the first spouse’s death
• Special Needs Trusts (SNT): An SNT holds assets for a person with a disability in a way that preserves their eligibility for public benefits such as Medicaid or Supplemental Security Income while allowing funds to be used for supplemental care
• Irrevocable Living Trusts: With an irrevocable living trust, the settlor permanently gives up control of the assets when they are transferred into the trust and may not serve as trustee (this type of trust can provide asset protection from creditors, estate tax savings, and provide eligibility for Medicaid for long-term care)
• Testamentary Trusts: A testamentary trust is created in a will and becomes effective only after the will is admitted to probate and the estate is administered

Estate planning can be tricky. If you have questions, consider speaking with a California estate planning attorney.

Additional Legal Documents

In addition to a will or trust, a comprehensive estate plan includes additional estate planning documents or instructions that help ensure your wishes are known and carried out. Some of the key documents are durable powers of attorney, advanced health care directives, and guardianship nominations.

Durable Power of Attorney

With a durable power of attorney (POA), you can appoint someone you trust to make decisions on your behalf if you become incapacitated.

Financial Decisions

You can use a Durable Financial Power of Attorney to appoint someone to manage your financial matters during your incapacity. The California Probate Code provides a detailed statutory form.

Healthcare Decisions

With a Healthcare Power of Attorney, you can designate someone to make your healthcare decisions if you become incapacitated. This can also be accomplished with an advance directive. This legal document allows you to provide written instructions on how you want medical decisions made on your behalf. The California Probate Code provides an Advance Healthcare Directive statutory form that you can use for a healthcare POA designation, written instructions for your medical care, and more.

Guardianship Nominations

If you have minor children or may have them in the future, you can nominate who you would want the probate court to appoint as their guardian. This legal document is important if you want a close friend, rather than a family member, to be your children’s guardian. Without the guidance of your nomination, the probate court will likely look to a relative to fulfill this role.

When To Update Your Estate Plan

The estate plan you create today may need occasional updating. Many factors can affect your estate plan strategy. These include changes to small estate thresholds and state or federal estate tax laws.

In addition to statutory changes, situations can also have an effect. A rise or drop in your net worth might impact your estate planning goals. Families can change through divorce and remarriage, and your health may impact how you plan to provide for your adult children. Moving to another state or acquiring substantial real property might necessitate updates to estate plans. Any major life event, financial change, or legal update means it’s a god time to review your estate plan to be sure it reflects your intentions, protects your assets, and complies with California law.

Getting your estate plan in place is a great first step. To stay on top of any changes that might affect your plan, it’s important to review your estate plan regularly.

Take the First Step To Get Started

Start the estate planning process by gathering the information you’ll need. With options like California’s statutory forms and online DIY estate planning tools, you may feel confident enough to handle it all yourself. If your situation doesn’t seem to fit the available resources or you feel overwhelmed by the process, meeting with a knowledgeable California estate planning attorney can be a huge help. They will evaluate your situation, provide legal advice, and create an estate plan that best serves your goals.

Whether a simple small-estate filing and beneficiary designations can handle your needs or you need a comprehensive estate plan, an experienced estate planning lawyer will help you evaluate your situation and help you create an estate plan that works best for you. There’s no shame in seeking help.