We all want to leave as much inheritance as possible to the people we love when we die. This is the essence of estate planning. However, the process of transferring your estate to your beneficiaries (known as probate) costs money. Thus, while working out your estate plan, one of the most important questions you want to find answers to is whether there is anything you can do to reduce or eliminate probate altogether.
To understand how to reduce the cost of probate, you need to start by understanding that the cost of probating your estate will largely depend on the clarity and validity of your instructions as well as the size and complexity of your estate.
What exactly are the probate costs?
Here are some of the fees incurred while probating an estate in California:
- Court costs – these involve the cost of publishing a public notice as well as filing fees.
- Professional services – these may include attorney’s fees as well as accountant or auditor fees.
- Estate taxes – While California doesn’t have an estate tax, your estate will still be subject to the federal tax depending on its size.
Clearly, these costs can add up pretty quickly. Fortunately, you can take the following steps to avoid or eliminate some of these probate costs:
Setting up a trust
Just as a will, a trust allows you to distribute your estate to the people and causes that you care about. However, any asset that is held in a trust is managed by the provisions of the trust’s instruments. This means that such assets are automatically passed down to designated beneficiaries without going through the probate process.
Setting a joint ownership with the right of survivorship
Any asset that you co-own with someone else under the joint ownership with the right of survivorship arrangement will automatically belong to the surviving party. Besides bypassing probate, this can also be a great strategy for reducing the size of your estate.
Probate is both time and resource-consuming. Understanding the state’s estate planning laws can help you take strategic steps to reduce the cost of probating your estate.