Non-Probate Transfers

Designated Beneficiaries on Accounts

The distribution of assets such as life insurance, annuities, retirement accounts and bank accounts are governed by contract law.  Therefore, the accounts can have one or more designated beneficiaries to whom the asset will be paid upon the death of the owner.  In addition, most of these accounts allow alternate beneficiaries in the event the primary beneficiary has died. However, if you are married, the Retirement Equity Act may supersede a beneficiary designation if the spouse has not consented to the designation. 

Joint Ownership of Accounts

Pursuant to California’s Multiple Party Account Law, bank and brokerage accounts can have multiple owners.  After the death of one of the owners, the remaining owners will continue the ownership.  If the account has more than one surviving owner, the surviving owners will maintain their ownership proportions plus an equal share of the decedent portion.    However, great CAUTION should be used in putting other people on bank and brokerage accounts because when title to a multiple party account can ONLY be changed by closing the account or the agreement of all parties. 

Real Property Transfers

If you are married and own real property in California as community property with the right of survivorship, the property will transfer to the surviving spouse with the benefit of a full step-up in basis without any requirement for a probate. A probate is also not necessary if title to real property is held as joint tenants, tenants in common or the interest is held by an entity such as a corporation. However, great caution should be used in holding real property as joint tenants. While joint tenancy with the right of survivorship can be very attractive for parents trying to avoid the necessity of a will or trust, the effect of transferring property into joint tenancy with children will cause a reassessment of the property for tax purposes and will also eliminate the opportunity for the children to receive the step-up in basis to full fair market value of the property on the death of the parent.  Joint tenancy can also open the property up to claims of creditors of the other owner(s). In California, absent an agreement by the parties, when one of the joint tenants dies, the surviving owner will only get a step-up in basis for 1/2 of the value of the property.