This article is written for California residents that own a membership interest in one or more limited liability companies. The concepts described below also apply to any type of property owned by a California resident.
Ask yourself this question: After I die do I want my property to go the people, companies or charities I chose or do I want the State of California to determine who inherits my property? The vast majority of California residents do not want the State of California to determine who inherits their property.
There are two ways to insure that your property goes to who you want to get it rather than going to who California wants to get your property:
- Option 1: A Will. This is the expensive way because it requires an heir to open a superior court proceeding called a probate. A California probate can be extremely expensive. To learn how expensive a California probate can be and why you do not want your family to suffer through a California probate read our article called “Trusts Should Own Valuable LLCs to Avoid Probate.” This article explains how you can save your loved ones thousands and thousands of dollars by avoiding an expensive and time-consuming California probate on your death.
- Option 2: A Trust. This is the inexpensive way to avoid probate. If your trust owns all of your membership interests in LLC (and any other type of prorperty) and you die, the property goes to the heirs you name in the trust agreement without the need for an expensive and time-consuming California probate. A trust can easily save your loved ones thousands or tens of thousands of dollars.
California’s Law of Interstate Succession
California Probate Code Section 6400 – 6414 contains the rules on who will inherit your property if you are a California resident who dies without a valid Will or trust. These types of rules are called the “law of intestate succession.” Intestate means dying without a Will. Check the table below and if you are a California resident and California’s law of intestate succession gives property to the wrong people then you need to sign a Will (most expensive to your loved ones) or a trust (least expensive – we only charge $997 to draft a custom trust).
If a California resident dies without a Will or a trust and he or she is married, the deceased’s property goes as follows:
Estate of a Married Deceased Person or Registered Domestic Partner
If the deceased was married or had a registered domestic partner the deceased’s assets must be reviewed and characterized as either community property or quasi-community property (marital property) or separate property.
All of the deceased’s community property and quasi-community property goes to the spouse or domestic partner. The deceased’s separate property also goes to the spouse or domestic partner if the deceased does not have any children or close relatives. There are rules that divide separate property among the surviving spouse or domestic partner and the children and certain close relatives.
If the deceased person was single the following heirs inherit in the order listed:
Children: to be divided equally among all children
All to parents: If no surviving spouse/domestic partner or children
All to siblings (or their children): If no surviving spouse/domestic partner, children, or parents
All to grandparents: If no surviving spouse/domestic partner, children, parents, or siblings (or children of siblings)
To the state: If, after an investigation, there are no relatives found
The rules can become complex, but the bottom line is you should have a Will or a trust to insure that your property always goes to the heirs that you pick.
How a California Resident Avoids an Expensive Probate
California probates can be extremely expensive because both the attorney and the personal representative are entitled to statutory fees plus there are additional fees such as court filing fees and appraisal fees. To learn how to save your loved ones thousands of dollars by avoiding a California probate read “Trusts Should Own Valuable LLCs to Avoid Probate.”