More California families will be able to transfer assets to descendants without undergoing a lengthy — and often costly — probate process under a new state law. Assembly Bill 2016, which takes effect April 1, changes the definition of “small estates” by raising the probate threshold to $750,000, a massive leap from $184,500.
While this new law does simplify the estate planning and administration process for many, it does not eliminate the need for estate planning. Ultimately, this may create a false sense of security for anyone who believes having their legacy and succession planning in writing is no longer necessary. Without a thorough estate plan in place, issues such as guardianship for minor children, the necessary care for family members with special needs, and business succession planning for California business owners could become unnecessarily complicated.
What California’s AB 2016 Says
Estates falling under AB 2016’s new “small estates” threshold will now be exempt from the formal probate process, allowing assets to be transferred more quickly and with fewer legal hurdles. The bill also calls for a review of this threshold every three years to account for inflation and other economic factors.
AB 2016’s intent is to simplify the transfer of assets, reducing both the time and costs associated with probate, making it easier for families to handle smaller estates. However, even though this bill offers an opportunity to streamline estate administration, it does not mean that planning can or should be ignored.
Why Even Small Estates Still Need a Plan
Even with the expanded threshold, families with “small” estates still need a strategic and formalized plan in place. For example, families with children who have special needs should not forego planning purely because they fall below the new threshold. Without proper planning, your children may lose eligibility for government benefits like Supplemental Security Income (SSI) and Medi-Cal if they receive an inheritance directly. Setting up a special needs trust is essential to ensure that your child is protected without jeopardizing their eligibility for these crucial programs.
Additionally, if you have minor children, estate planning is still crucial. Without a plan in place, the court will determine guardianship for your children and the assets they inherit, which may not align with your wishes. Managing assets for minors can also be complicated without the proper documents in place, such as trusts that can provide ongoing financial support and manage assets until your children are mature and of age.
What AB 2016 Means for Business Owners
For business owners, AB 2016 may not simplify estate planning as much as it does for personal assets. Business succession planning should still be handled formally and strategically, regardless of whether your business assets fall under the $750,000 threshold or not. To ensure your business’ smooth transition, you will still need to establish an entity — such as an LLC or corporation — and have a trust in place to manage the transfer of ownership. Without these critical documents executed, your business could face unnecessary financial repercussions, disputes, or even dissolution after you pass away.
Manage Your Estate With Confidence
Don’t let the expanded definition of “small estates” lull you into complacency. Comprehensive estate planning and having an effective Asset Protection Plan are still necessary to protect your loved ones, your assets, and your business. At Dahl Law Group, we provide effective legal counsel to guide you and your loved ones through the process of protecting your legacies, children, and businesses. Contact us at our offices in Sacramento or San Diego today to discuss how we can help you plan with confidence, regardless of the size of your estate.
Dahl Law Group
