AB 2016: A significant change to small estate petitions for real property

In August 2024, AB 2016 was finalized, amending key sections of the California Probate Code that impact how successors can manage a decedent's real property held in the decedent's name alone. Normally, this would necessitate a probate proceeding, as most real properties in the state are valued above the small estate affidavit threshold. This update will notably affect the simplified process known as "small estate petitions," especially for real properties valued at less than $750,000, and becomes effective next April.

Currently, real property worth less than $166,250 for deaths before April 1, 2022, and now updated to $184,500 for deaths after April 1, 2022, can bypass formal probate under the "small estate" provisions. This makes it easier for successors to transfer or dispose of property without enduring the court's probate process. There are two options available, depending on the real property value at the date of death: the "Petition and Court Order Determining Succession to Property" for real property valued at less than $166,250 or $184,000, and the "Affidavit for Succession to Real Property of Small Value" for real property valued at less than $55,425 or $61,500. These provisions are codified at California Probate Code Sections 13151 et seq. and 13200, respectively. The probate referee determines the value of real properties for these petitions, and such appraisals must be completed on the Judicial Council-approved Inventory and Appraisal form under attachment 2.

These petitions must be signed by all heirs at law, and once granted by the court, immediately vest title of the subject real property into the names of all heirs. The "Petition and Court Order Determining Succession to Property" is set for a hearing, after which an order is issued, and a certified copy of the order is recorded in the appropriate county. The "Affidavit for Succession to Real Property of Small Value" is not set for a hearing but is reviewed by the filing clerk. Once approved, the clerk signs the "Clerk's Certificate" section, and the form, with the seal, becomes the order itself, after which a certified copy is recorded as well. 

However, with the passing of AB 2016, real properties that were the decedent's primary residence or valued under $750,000 at the date of death will be eligible for this expedited process, likely under the "Petition and Court Order Determining Succession to Property." We do not yet have updated Judicial Council forms to match this new law. Additionally, the bill requires notice to all heirs and beneficiaries, which will likely lead to more contested cases.

First, $750,000 is a significant threshold increase and will capture more real properties that can use this process. However, this still does not capture most real properties in the state, especially in Southern California counties, as real estate values have skyrocketed. 

Second, the utilization of this procedure immediately vests the subject real property into the names of the heirs, which can cause complications. This means that all heirs immediately become real property owners and must collectively agree--together and all at once--to keep, sell, or otherwise manage the property. A family with two or more children may find this taxing. Normally, in a probate proceeding, one person acts as the petitioner and becomes the court-appointed personal representative, who can decide in the probate process, with proper notice, to sell or convey the real property. Similar procedures exist for real properties held in a trust as well.

Third, many title companies are hesitant with unfamiliar processes. This has been true for real properties conveyed by the newer revocable transfer on death deeds. In my experience, properties handled by these deeds are under greater scrutiny and often denied underwriting by title companies, necessitating a court procedure to validate the deed. This provision, enacted in January 2016 under California Probate Code Section 5642, is still not fully "normalized."

Fourth, using these procedures does not give the heirs administrative powers. Wills admitted to probate and trusts are useful because they grant powers to individuals to act on behalf of the decedent. For example, handling or forwarding mail, filing final tax returns, negotiating with creditors, and so on.

Estate planning now becomes even more crucial to avoid delays, disputes, and added expenses. Trusts remain the most effective tool--they're familiar and work well.

If legislators wanted to streamline the probate process, more could have been done, such as modifying how publication is handled for decedents' estates and reducing statutory attorney and personal representative fees as an example.

As we adjust to this new law, I encourage clients to ensure their estate plans are comprehensive and up to date, and that, where trusts are involved, all real property owned by a client is properly vested in the trust. Working with an experienced attorney to craft a solid estate plan can mitigate potential conflicts and ensure your loved ones are well-prepared, minimizing the need for court procedures and potential litigation.