INHERITANCE LAW: Small Estates Intestacy Estate Tax Probate Court

San Pedro, CA Inheritance Law

San Pedro, California 90731

What California Residents Need to Know About Inheritance Law

Welcome to the fastest and easiest way to find out about Inheritance Law in California.

Three things to keep in mind:

1. Many estates can avoid probate altogether, either because they're small enough to fall under a state's small estates limit, because the assets were held in a living trust, or because the assets will go to named beneficiaries because they are held as pay-on-death or  joint tenancy accounts, or in retirement or life insurance.

2. You have to pay creditors and taxes before you can inherit assets.

  • You always have to pay taxes before any other creditors can get paid. 
  • Debts that are secured by property, like mortages, are called secured debts, because if someone doesn't pay the loan, the lender can take the property. If you inherit a house, you also inherit the mortgage.
  • Unsecured debts, like credit cards, don't work that way -- as a beneficiary you are not responsible for that debt,
  • But the estate needs to pay all known creditors before distributing property to beneficiaries and heirs. Otherwise, a creditor can come calling to get paid back from estate assets, even after they've been distributed.

3. Most estates do not need to file a Federal estate tax return. Unless an estate is worth more than $12,920,000, it will not need to file a Federal estate tax return.

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Does California Collect Estate or Inheritance Tax?

California residents do not need to worry about a state estate or inheritance tax. California does not have these kinds of taxes, which some states levy on people who either owned property in the state where they lived (estate tax) or who inherit property from someone who lived there (inheritance tax). more...  

How Probate Works in California

Probate is the official way that an estate gets settled under the supervision of the court. A person, usually a surviving spouse or an adult child, is appointed by the court if there is no Will, or nominated by the deceased person's Will. Once appointed, this person, called an executor or Personal Representative, has the legal authority to gather and value the assets owned by the estate, to pay bills and taxes, and, ultimately, to distribute the assets to the heirs or beneficiaries.

The purpose of probate is to prevent fraud after someone's death. Imagine everyone stealing the castle after the Lord dies. It's a way to freeze the estate until a judge determines that the Will is valid, that all the relevant people have been notified, that all the property in the estate has been identified and appraised,  that the creditors have been paid and that all the taxes have been paid. Once all of that's been done, the court issues an Order distributing the property and the estate is closed.

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What Rights Do Creditors Have?

In all states, creditors have a right to make a claim against a probate estate for money that is owed to them by the decedent. And creditors' claims have a priority over the beneficiaries' rights to distribution from the estate. 

Think of it this way, the executor has to do three things in any probate:

1. Collect the estate's assets.

2. Pay the estate's debts.

3. Distribute the estate's remaining assets to the beneficiaries.

And it's just common sense that these steps must be done in order. If an executor distributes money before the debts are all paid, creditors have the right to go after these distributions to secure payments, and no beneficiary is going to be happy about that. more...  


How to Probate a Small Estate in California

Options for Small Estates in California

California offers options for simplified probate procedures, depending on the value and complexity of the estate. These include the Small Estate Affidavit process and the Simplified Probate Procedures.

  1. Small Estate Affidavit

    For estates valued at $166,250 or less (as of 2021), California law provides a "small estate" procedure where you can transfer most property to inheritors without going to court. The process involves:

    1. Wait 40 days after the death of the estate owner.
    2. Prepare a small estate affidavit, detailing the property to be transferred, affirming that the estate falls under the small estate limit, and that the person filing the affidavit is entitled to receive the property.
    3. Sign the affidavit under oath and notarize it.
    4. Present the affidavit to the person, bank, or company that has the property now.

    This process allows you to avoid court involvement, legal fees, and the long timeline that can come with standard probate procedures. This procedure is outlined in the California Probate Code §13100-13116.

  2. Simplified Probate Procedures

    California also provides a quicker process for probate, known as the “simplified” or “summary” probate procedure, for certain estates. If the gross value of the decedent's real and personal property in California does not exceed $166,250, a simplified process can be utilized. Here are the steps:

    1. A Petition to Determine Succession to Real Property (and Personal Property) is filed.
    2. If the petition is uncontested and approved by the court, an order is signed by the judge.
    3. The order is then certified by the court clerk.
    4. The certified order is recorded in the county where the real property is located. After recording, the person named in the order is the owner of the real property.

    This procedure allows the estate to bypass the traditional probate process, which typically involves multiple court hearings, numerous filings with the court, and potential delays due to backlog in the court system. This is governed by the California Probate Code §13150-13158.

Small Estate Limits for California

In California, there is an Affidavit procedure available as long as the personal property does not exceed $184,000. There's a 40-day waiting period. Cal. Prob. Code 13050.

There's also an Affidavit procedure that you can use if you have real property worth less than $50,000 (of which there is not much in the Golden State); there's a six month waiting period for this. Cal. Prob. Code 13200 and following.

 You can also use an Affidavit to collect up to $15,000 of salary and other compensation (including unused vacation time) owed to the deceased spouse. Cal. Prob. Code 13600.

There's also a summary probate procedure that's available for estates worth less than $150,000. This dollar value doesn't count real property outside of California, property that passes by joint tenancy, property left outright to a surviving spouse, life insurance or other assets that pass by beneficiary designation, and property held in living trusts. Cal. Prob. Code 13150 and following.

What's Included in valuing the estate?

Not everything a person owns is part of their "Estate" for probate purposes.

If you're wrapping up the estate of a California resident who died with an estate that's worth less than a certain dollar amount, you won't have to go through a formal probate court proceeding. 

It doesn't matter whether or not the deceased person left a will; what matters is the value of the assets left behind. If the estate's value is under the "small estates" limit in California, you can take advantage of a simplified probate procedure, often called a "summary probate." Instead of having a court hearing in front of a judge, you may need only to file a simple form or two and wait for a certain amount of time before distributing the assets.

In some states, it can be even easier: Inheritors can use a simple affidavit to claim assets. (An affidavit is a statement you sign in front of a notary, swearing something is true.) If you live in one of those states, you just have to wait a required period of time, then sign a simple, sworn statement that no probate proceeding is happening in your state and that you are the person entitled to inherit a particular asset--a bank account, for example. 

Adding it up, what's in, what's not

When you are trying to determine whether or not an estate's value is below the California small estates limit, the first thing to do is make a list of the assets. A simple spreadsheet or list will do.

Not everything a person owns counts, though.

Include only the things that pass to heirs and beneficiaries by will or, if there's no will, by California intestacy laws, which determine who inherits if there is no will.

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Who Manages Property Inherited by Children in California?

Until a child is eighteen years old, they can't inherit property in their own name.  Instead, an adult needs to manage that property until the child can manage it for themselves.

A child can inherit property in several ways:

  • If a person dies and leaves behind a Will or a trust, and names that child as the beneficiary, then it will be the Trustee's job to manage that child's property according to the terms of the document.
  • If a person dies and makes a gift to a child under that person's state's Uniform Transfers to Minors Act, the child's money will be placed in a custodial account for that child's benefit to a certain age.
  • Finally, if a person dies and leaves money to a child directly, or names that child as a beneficiary of a life insurance policy or a retirement account, a court will need to appoint a property guardian to manage that child's money to age eighteen.

Child as Trust Beneficiary

If a child is the beneficiary of a trust, the Trustee will need to get a tax identification number for that child's trust, open up a bank or brokerage account in the name of the trust (using that new tax id number), and then distribute the assets to the child as directed by the trust.  

For example, if a child is the beneficiary of a trust to age twenty-five, and the trust directs the Trustee to distribute the money for that child's, "health, education, maintenance, and support," (which would be a typical distribution standard), it will be the Trustee's job to distribute money to that child until the child turns 25. After that, the trust would terminate, and the child would be in charge of managing and distributing the money themselves.

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Who Inherits When Your Spouse or Parent Dies Without a Will in California?

If your spouse or parent dies without a Will, California law determines who will inherit his or her property. These laws, called intestacy laws, are essentially state-written Willls that determine who gets the decedent's property.  The word "intestate" describes a person who dies without a will.  A person who dies with a Will is said to die "testate."

Generally, in intestate succession, property goes to close family members, starting with a surviving spouse and children, and then gradually widening out to parents, siblings, nieces and nephews, grandparents and their legal descendants, and more distant relatives after that. If absolutely no relatives can be found, then a decedent's property goes to the state.

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How to Get a Tax ID Number for a Trust or Estate in California

If you are serving as the executor or trustee of a deceased person's estate or trust, you are going to have to get a taxpayer identification number for the estate or the trust. You cannot use the deceased person's Social Security number, or use your own. There is one exception to this rule: if you are the surviving spouse, and everything is left to you either outright or in a revocable living trust, you can continue to use your own Social Security number for these assets, but that's because, essentially, they are your assets.

This ID number, called an EIN ("employer identification number"), is like a Social Security number for the estate or trust. You'll need it to open a bank or brokerage account, and it's what the bank or other financial institution is going to use to report the interest earned on those accounts until they are distributed to the estate's or trust's beneficiaries.

The easiest way to apply for an EIN is on the IRS website, www.irs.gov. The process just takes a few minutes and, when you are done, the site gives you the EIN that you'll use for the estate or the trust. If you don't have access to a computer, you can fax in an application to this number: (859) 669-5760.

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How to Inherit Life Insurance in California

Wills and trusts get a lot of attention in the movies when it comes to inheritances, but in real life, life insurance often is the source of the biggest cash benefit to families and loved ones. And who gets that money usually has absolutely NOTHING to do with either a Will or a trust, instead, it is the policy's beneficiaries who will receive that death benefit.

When someone purchases a life insurance policy, they have to name primary and secondary beneficiaries.  The primary beneficiary receives the death benefit if they survive the insured party; the secondary beneficiaries will receive that benefit only if the primary beneficiary does not survive the insured party.

In order to claim these benefits you'll need to know the following things:

  • Whether the decedent owned any life insurance
  • Who the beneficiaries are for those policies
  • What kind of policy it is
  • How to make a claim for the benefits

Read on to find out how to do each of these four things.

For example, if a husband, Sam, names his wife, Lani, as the primary beneficiary of his $1 million policy, and then his three adult children, in equal shares, as the secondary beneficiaries of that policy,

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What California Residents Need To Know About Federal Capital Gains Taxes

Capital gains taxes are taxes that you need to pay when you sell an asset that has gone up in value. You are taxed on the difference between what you bought the asset for (called "basis") and what you sold it for. Every piece of property has a tax basis. Generally, its the amount a person paid for the property. When you inherit an asset, you need to know what basis that asset has, so that, later, if you go ahead and sell it, you can calculate the capital gains taxes that will be due. (Currently, the federal long-term capital gains rate is 15% for most people; 20% + a 3.8% (23.8%) Medicaid surcharge for high earners.)

Stepped-Up Basis: The Inheritor's Big Tax Benefit

Generally, an asset is inherited with a basis equal to its date of death value. This is called a stepped-up basis, because an asset's basis is increased to reflect its value at the date of death. A step-up in basis is a big tax advantage because it reduces the capital gains taxes due upon the sale of an inherited asset. The higher the tax basis, the lower the capital gains upon the sale of that property.  more...  


What California residents need to know about state capital gains taxes

In addition to federal capital gains taxes, some states also levy a state capital gains tax. California has the highest marginal tax rate, which combines both federal and state capital gains, of (37.3%), followed by Oregon (34.9%), and Minnesota (34.85%).

The average state capital gains tax rate is 28.7%, and nine states have no capital gains tax at all.

Click here to see what your state's capital gains tax rates are.




How to Inherit Retirement Assets in California

In December of 2019, Congress passed a law called the SECURE Act, making big changes to retirement and estate planning. (“SECURE” stands for Setting Every Community Up for Retirement Enhancement.) One of the most significant changes is what happens if you inherit an IRA.

The old rules gave several choices to someone who inherited an IRA. One option was to withdraw only a small amount from the inherited account each year. The withdrawal amount was based on the beneficiary’s age, and it allowed the bulk of the inherited IRA to continue to grow tax free. (The beneficiary paid tax on only the small amount that they withdrew.)

But not anymore.

How the SECURE Act Affects Inherited IRAs

Now, the beneficiary must withdraw all of the money in an inherited IRA by the tenth anniversary of the plan holder’s death. And all of those withdrawals are subject to income tax at the beneficiary’s tax rate. The law does not require minimum distributions during that ten-year period, but it is no longer possible to stretch out withdrawals over the beneficiary’s life.

Certain people are not subject to the ten-year rule:

  • surviving spouses
  • people with certain chronic illnesses
  • people with certain disabilities
  • children under the age of 18 (after they turn 18, the ten-year rule applies), and
  • beneficiaries who are less than ten years younger than the deceased plan holder. more...  


Special Options for Surviving Spouses Who Inherit Retirement Accounts

If you are the surviving spouse of someone who named you as their beneficiary for an IRA or 401(k), you have special options.

  • You can roll the IRA over, and turn it into your own account, which means you don't have to withdraw anything until you are 70 1/2.
  • You can keep the account in the deceased spouse's name as an "inherited IRA," which allows you to withdraw the money without an extra 10% penalty.
  • You can make an "informal rollover" by accidentally contributing to the account, or by failing to make a required withdrawal, in which case it becomes your own IRA.

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Forms for Avoiding Probate in California

If you plan ahead, here's a collection of forms you can use while you're still alive, if you plan ahead, to avoid having your assets go through probate when you die.

  • Transfer-on-Death (Beneficiary) Deeds
  • Living Trusts

If you are already in probate, you may find the forms for transferring property useful.

  • Quitclaim Deed
  • Assignment of Rights

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How to Inherit Payable on Death (TOD) Accounts and Real Estate in California

A payable-on-death account is a bank or brokerage account with a designated beneficiary. Sometimes these are also called "Totten Trusts" or transfer-on-death accounts.

Whatever they're called, at the death of the account owner, the assets in the account are distributed to the person or people designated as account beneficiaries.

Usually, all that's required at the death of the account owner, is for the designated beneficiary to fill out a claim form and to supply a copy of the death certificate.

That's it.

If you're not sure whether or not an account had a designated beneficiary, you'll need to check with the bank or brokerage company and check on the account's registration.

For example, if Nila opened a checking account and then designated her brother, Jack, as the payable-on-death beneficiary, upon Nila's death, Jack will receive the account's assets.

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What Taxes Need to Be Filed After Someone Dies?

There are three main federal tax returns that you'll need to consider filing in the year after someone has died, but it's unusual to file all three. In addition, you'll have to file an individual state income tax return for the decedent, and, in some states, a state estate or trust income tax return, or a state inheritance or estate tax return.

The person who files the return is called the Personal Representative. If there's a probate, that's the executor. If there's no official executor, the person who has taken responsibility for distributing the person's property will be in charge of paying the taxes.  If there's a trust, and that's where the assets are, this is the Trustee. Basically, the IRS will deal with the person responsible for distributing the decedent's property, however that's going to happen.

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What's New for 2023 for Federal and State Estate, Inheritance, and Gift Tax Law

Here's a quick summary of the new gift, estate, and inheritance changes that came along in 2022. Spoiler alert: very few people now have to pay these taxes.

1. The federal estate and gift tax exemption increased from $5,000,000 in 2017 to $10,000,000 in 2018, indexed to inflation. In 2023, that is $12.92 million. This higher federal exemption means that fewer people will be subject to the estate tax since only estates with assets that exceed that exemption are required to file a federal estate tax return. (Surviving spouses of decedents with estates less than this exemption may still decide to file an estate tax return to request portability, which is the ability to use their deceased spouse's unused exemption at their own death, but they are not required to do so.) Click here to find out more about when an estate tax return does, or doesn't, need to be filed.

2. Several states have increased their state estate tax exemptions, either because they were already indexed for inflation or because they changed their state laws, either way, this means that fewer residents of those states will be subject to estate tax. more...  


How to Find an Inheritance & Probate Lawyer in San Pedro, CA

You don’t always need to hire an inheritance and probate lawyer to help you wrap up someone’s estate -- but you should at least take some time to consider the ways a probate lawyer can help you.

Why Hire an Inheritance & Probate Lawyer

Inheritance & probate law is a specialty, and a good probate lawyer can make a big difference in the results you get. If you decide to hire a lawyer, you’ll want to find someone who focuses only or almost exclusively on probate cases, rather than using a general practice lawyer or a lawyer who concentrates on some other legal subject.

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Ten Ways an Inheritance & Probate Lawyer Can Help You

If you’ve been named as an executor or personal representative—that is, the person in charge of wrapping up the estate of someone who has died—you may need or want to hire a probate lawyer.

It’s not always necessary to use a probate lawyer (sometimes called an inheritance lawyer). If the estate is modest and doesn’t contain tricky kinds of property like a business or real estate in multiple states, you may be able to handle the process on your own. (There are plenty of resources available to help you with that. A good one to start with is Nolo’s Executor’s Guide.)

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How To Use ChatGPT (and Other AI Tools) to Navigate the Probate Process in California

If you've been reading at all, you know that the improvement in generative AI tools, like ChatGPT v.4, have made it possible now to get work done more quickly than ever, especially in knowledge fields like law.

This is great news for consumers because now they can use ChatGPT as a probate assistant when dealing with transferring the property of a loved one when someone dies in their state.

This article will show you how to effectively use AI tools like ChatGPT, Google Bard, and Claude.ai to help you through the probate process in your state.

Let's get started. more...  




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