California’s Assembly Bill 2016 – which goes into effect April 1 – introduces significant positive changes to the probate process, particularly for primary residences.
Simplifying the Process
The law raises the value threshold for primary residences that can bypass the full probate process to $750,000. This is a substantial increase from the previous limit of $184,500. This means many more estates can use a simplified petition process which means fewer court appearances and less paperwork, making the undertaking quicker and less costly.
The number of additional people who will be able to take advantage of this change is considerable. The median price of a home in California is between $774,000 and $788,000, according to Zillow and Redfin, respectively. An estimated 40% of homes are within the AB 2016 threshold. The latest data from the U.S. Census Bureau indicates there are approximately 14.8 million housing units in California, of which about 56% are owner-occupied. This means that roughly 8.2 million homes are owned by their occupants in the state.
The law specifically targets primary residences, meaning other types of real property, like rental or commercial properties, do not qualify for this simplified process. Non-primary real estate and other assets (e.g., bank accounts, investments) still need to go through the traditional probate process unless they fall under the existing small estate affidavit threshold of $184,500. For these other assets, the existing probate procedures remain in place, which can be more time-consuming and expensive.
Impact on Estate Planning
Estate planners will want to ensure that a client’s primary residence qualifies for the simplified process, which could mean getting fresh property appraisals. If many homeowners do this, it is likely that the number of eligible estates could be higher than today’s property values would suggest.
Despite the new law, we highly recommend creating a living trusts to help avoid probate entirely for all types of property, not just primary residences. Estate planners will need to consider both the new simplified process for primary residences and traditional methods for other assets. This might involve a combination of wills, trusts, and other legal instruments to ensure a smooth transfer of all assets. That said, this is good news for many homeowners and estate planners.
Questions?
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