Most Common Types of Estates
09.19.2022 | Trusts and Estates
What Are the Most Common Types of Estates?
The law recognizes many different types of estates. For example, a marital estate contains the community property that is owned by a married couple.
In the context of estate planning, your estate (or gross estate) includes everything that you own when you die. Your probate estate contains the property that you own at the time of death that is specifically included in your will. Your intestate estate contains the property that you own at the time of death that you did not include in your will.
Understanding these estates will help you to understand what will happen to your assets when you die.
Here are five of the most common types of estate and the ways that they will affect your estate planning.
Marital Estate
California is a community property state. This means that all property acquired during a marriage is considered to be part of the marital estate.
The marital estate excludes separate property. Separate property refers to any property that is owned by only one spouse. Some common examples of separate property include:
- Property acquired before the marriage
- Gifts and inheritances of one spouse during the marriage
- Property acquired after the spouses legally separate
Upon death, a court distributes separate property and the assets of the marital estate in accordance with specific rules.
If the Deceased Spouse Has a Will
The deceased spouse can direct that up to half of the marital estate should pass on to someone besides the surviving spouse. For example, a deceased spouse can direct that half the marital estate can be passed on to their children from a prior marriage. The remaining half of the marital estate must be given to the surviving spouse.
The deceased spouse can also name a party that separate property should be passed on to. Since it is separate property, the surviving spouse would not have an automatic claim to it.
If the Deceased Spouse Does Not Have a Will
The entire marital estate and all separate property will pass to the surviving spouse if the deceased spouse leaves no will.
Your intestate estate includes everything that you own that you did not address in your will. Again, this might include property from your marital estate or separate property.
For example, suppose you have a baseball card collection. If you did not identify who should inherit the baseball cards in your will, it would become a part of your intestate estate and will pass on according to the rules of intestate succession in California.
Gross Estate
The concept of a gross estate is important for calculating federal estate taxes. Your gross estate includes more than just your assets. Under federal tax law, your gross estate includes everything you own or have certain legal interests in at the time of your death. The gross estate includes:
- Assets, such as cash, securities, and the fair market value of the personal and real property at the time of death
- Gifts that were given within three years of death
- Life insurance
- Annuities
- Ownership shares of businesses
- Assets held in any trust (except for irrevocable trusts)
- Money owed to the decedent
- Retirement accounts
In a community property state, your gross estate includes your share of the marital estate.
Taxable Estate
The taxable estate is equal to your gross estate minus allowable deductions. Under current tax law, the allowable deductions are generous and include:
- Debts that you owe at the time of your death
- Charitable transfers from your estate
- Allowable expenses, like funeral expenses, medical bills, and administrative expenses
- Automatic transfers to a spouse under a trust or right of survivorship
From this amount, you would then receive an exclusion so that only part of your estate will be taxable. Depending on the timing of your death, the exclusion may be up to $11 million. For this reason, many estates are not taxed because very few people pass on more than $11 million in net assets.
The amount remaining after applying the deductions and exclusion constitutes your taxable estate.
Probate Estate
Your probate estate includes everything that is identified in your will. This might include property from your marital estate and separate property if you are married at the time of your death.
In essence, your probate estate includes everything that you want to pass on in accordance with your will. If you have a classic Mustang that you want your cousin to inherit, you would include those instructions in your will. As a result, your Mustang would be included in your probate estate.
Intestate Estate
The primary method for providing instructions about the ways that courts should handle your estate comes by writing a will. Without a will, your entire estate would be deemed to be an intestate estate and your property would pass in accordance with California law, not in accordance with your wishes.
A lawyer who practices estate law can help you to understand how this can affect your estate and to draft a will to ensure your wishes are followed.
Ensuring That Your Wishes Are Followed
The primary method for providing instructions about the ways that courts should handle your estate comes by writing a will. Without a will, your entire estate would be deemed to be an intestate estate and your property would pass in accordance with California law, not in accordance with your wishes.
A lawyer who practices estate law can help you to understand how this can affect your estate and to draft a will to ensure your wishes are followed.
Talk With A Trusted Trust And Estate Lawyer
Whether you are engaged in an estate dispute or are seeking representation for creating or updating an estate plan, our attorneys are here to provide you with knowledgeable advice and advocacy. To arrange your initial consultation, please call our law offices today.
Your Partner For Success
Our attorneys are here to help you explore legal strategies that resolve today’s business disputes and prevent further disputes from occurring in the future. To learn more about how we can help you achieve your business law goals, call our law offices at 949-474-0940.