When someone dies, there are usually questions about how to collect and distributed the property of the deceased. Depending on different factors, it is possible that different paths that can and/or must be taken in order to locate, collect, and distribute property after someone dies.
The biggest factors are the name in which the property was owned (i.e., the name on a bank account or deed), whether or not there a living trust had been created, and whether the property was jointly owned or any beneficiaries are associated with the property.
When the creator of a living trust passes away, this usually triggers certain provisions of the trust that make the trust irrevocable and directing the transfer of property to beneficiaries (or at least making new people the beneficiary of the trust). If the person that created the trust was also acting as the trustee, it will also trigger a change in trustee. Often times it will be necessary for the new trustee(s) to obtain a separate tax payer identification number for the trust (also called a Federal Employers Identification Number, or FEIN).
Whenever a trust becomes irrevocable or there is a change in the trustee this also triggers a requirement for certain notices to be given to the beneficiaries and certain other people. Included with the requirement to provide certain notices, the new trustee(s) must provide an accounting to the beneficiaries.
Then it is necessary for the new trustee(s) to make sure they collect all of the trust property and the ownership reflects that there has been a change in trustee. Sometimes this is relatively easy while other times it is a much more involved process; it really depends on whether the decedent’s property was already transferred into the trust or had trust listed as a beneficiary.
When it comes to representing a trustee, the attorney’s level of involvement usually is determined by how much or little the trustee wants to do and is capable of doing without an attorney’s assistance.
Jointly Owned Property and Beneficiaries (Automatic Transfers Upon Death)
Some property automatically passes to the surviving joint owner(s) upon the death of a co-owner. In other instances the deceased co-owner’s share passes to their heirs or estate beneficiaries. For most bank and financial accounts, a joint owner will inherit the entire account when another joint owner of the account dies (this is different from a co-signor on an account).
For real estate, if a deed lists the co-owners as “joint tenants” or “community property with a right of survivorship” (for married couples), then the surviving co-owner(s) inherit automatically. However, if the deed lists the co-owners as “tenants in common” or the deed does not explicitly say “joint tenants” or “community property with a right of survivorship” then the deceased co-owners share passes to their heirs or estate beneficiaries.
For financial accounts and some other some assets, a beneficiary can be associated with them (like life insurance policies or accounts with financial institutions), and the beneficiary automatically becomes the new owner upon the death of the account holder. In these instances, there is usually very little work needed for the beneficiary to collect those assets and this is frequently done without the assistance of an attorney.
When someone dies without a living trust, the property remaining in their name must go through a court process to authorize someone to collect and distribute that property. This process is called “probate” and generally is a rather long and expensive process. Depending on the value of the estate, and whether or not it contains any real estate, there might be options to administer the estate as a “small estate” through a shorter and simplified process.
There is a misconception that having a Will prevents someone’s property from going through probate; however a Will does not transfer property out of someone’s name (like a living trust does) and thus requires a court to appoint someone to represent the estate (the personal representative of the estate; called the “executor” if named in the decedent’s Will and called the “administrator” if there is no will or the appointed person is not named as executor by the will).
Small Estate Administration
There are a few different procedures for administering a “small estate” but the availability of these options depends on the value of the property. Currently, there are three main “small estate” options:
- To collet personal property if the estate’s total value is less than $166,250.
- To transfer real estate if the “gross value” of all the decedent’s real estate in California is less than $55,425 (regardless of the value of the rest of the estate) – used mostly for fractional interests and timeshares.
- To transfer real estate valued at more than $55,425 if the estate’s total value is less than $166,250.
*“Gross value” means debts and mortgages are not subtracted from the value.