Good start to avoiding probate

By Len Tillem and Rosie McNichol

Dear Len & Rosie,

My husband and I have our house in community property with right of survivorship, and our 403b’s and IRAs have designated beneficiaries. All our other accounts also have beneficiaries. We have only have handwritten wills. From my research, none of the above would go through probate.

I know that is probably a naive plan, but we are with the dreaded majority that have yet to contact a lawyer to complete the process. Am I at least correct on the probate part for those items listed?

Annie

Dear Annie,

You have made a good start, but you are really only halfway there with respect to avoiding probate. This plan of yours will avoid probate when the first of you or your husband die, but it won’t avoid probate upon the death of the surviving spouse.

The problem is your house. It will avoid probate on the first death, because it’s titled as community property with right of survivorship. And your retirement accounts and other investments will avoid probate if you have designated beneficiaries for each account, or hold assets in joint tenancy with your children, but under most circumstances it’s crazy talk to seriously consider putting your children on the deed to your home.

What if your daughter gets sued? There could be a judgment lien recorded against your home. What if you want sell your home someday? Your son could refuse to sign the deed. So forget about putting your children on the deed to your home, ever, unless there’s no other alternative and you do so with the advice of an attorney.

Ideally, you and your husband should create a revocable trust. If you don’t do this, the surviving spouse could create a trust after the first death. But it’s best to do it now, because avoiding probate isn’t all there is to estate planning. You should have durable general powers of attorney and advance health-care directives so you and your husband, or your children, can make important legal and financial decisions for one another if either of you become incapacitated.

You should also review the beneficiary designations of your retirement accounts. You said you have taken care of this already. But have you really?

Does each account name alternate beneficiaries? Do you have copies of signed beneficiary designation forms in case your IRA custodian or insurance company loses the paperwork (we’ve seen this happen).

Be very careful with your retirement account beneficiary designations, because if you made a mistake, there won’t just be a probate, there will be a whole lot of income tax due on your retirement savings.

So, you’ve made a good start. Sort of. But you’re not there yet. In a pinch your plan will work, assuming your wills are valid and actually do what you want them to do, but if you really want to be sure, you need to consult with an attorney and create a proper estate plan.

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, 996-4505 or at www.lentillem.com. Len also answers legal questions each weekday, noon to 1 p.m., and Sundays, 4-7 p.m., on KGO Radio 810 AM.

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