Probate is the process by which the Court oversees the administration of your estate, including the payment of any debts and the transfer of your assets to your beneficiaries or heirs. What some people don't know, however, is that there are a number of statutes within the California Probate Code that are intended to protect your family (e.g., surviving spouse and your descendants).

While this is typically a positive benefit for your family, it may not be what you intended, for example, if you had others beyond your family that you wanted to care for and who you wanted to have as the beneficiaries of your estate. Under the law, your family's needs may have priority over your other beneficiaries, which may ultimately affect your estate plan.

Here are some of the family protections available:

1. Family Allowance - An allowance that is provided to your family during the probate administration period, which would utilize the estate assets.
2. Probate Homestead - May allow your family to continue using your home after your death, which would prevent other beneficiaries from receiving the home.
3. Small Estate Set Aside - A court may allow estates that are worth $20,000 or less to be set aside for the benefit of a surviving spouse or minor children to the exclusion of the beneficiaries named in a Will.

Understanding the impact of the provisions in your estate plan is vital in ensuring that you and your family have a plan that is predictable and that your wishes are ultimately carried out. 

A relatively minor topic that doesn't seem to get much coverage is one's ability to change death beneficiaries on nonprobate assets (e.g., life insurance policies, retirement accounts, etc.) after obtaining his or her spouse's consent to the transfer. This may come up for example, if you and your spouse decide on the beneficiaries of your life insurance policy, and subsequently your spouse passes away.

For this, we turn to California Probate Code Section 5023, which states:

(a) As used in this section “modification” means revocation of a provision for a nonprobate transfer on death in whole or part, designation of a different beneficiary, or election of a different benefit or payment option. As used in this section, “modification” does not mean, and this section does not apply to, the exercise of a power of appointment under a trust.

(b) If a married person executes a provision for a nonprobate transfer of community property on death with the written consent of the person’s spouse and thereafter executes a modification of the provision for transfer of the property without written consent of the spouse, the modification is effective as to the person’s interest in the community property and has the following effect on the spouse’s interest in the community property:

(1) If the person executes the modification during the spouse’s lifetime, the modification revokes the spouse’s previous written consent to the provision for transfer of the property.

(2) If the person executes the modification after the spouse’s death, the modification does not affect the spouse’s previous written consent to the provision for transfer of the property, and the spouse’s interest in the community property is subject to the nonprobate transfer on death as consented to by the spouse.

(3) If a written expression of intent of a party in the provision for transfer of the property or in the written consent to the provision for transfer of the property authorizes the person to execute a modification after the spouse’s death, the spouse’s interest in the community property is deemed transferred to the married person on the spouse’s death, and the modification is effective as to both the person’s and the spouse’s interests in the community property.

Reading through the code section above, generally reinforces the idea that absent some sort of writing by your spouse indicating that you may subsequently modify your beneficiary designations, you only have the ability to control the transfer of your 1/2 interest in community property.

Like most rules, however, there is an exception. Retirement plans that are subject to ERISA laws (2 common examples 401(k)s and 403(b)s) have particular rules. For divorce purposes, your spouse may have a community property interest in those accounts; however, for purposes of transfers upon death, if your spouse passes away before you, his or her community property interest in the 401(k) or 403(b) would pass to you.

Although this may seem surprising on the surface, in reality, I rarely see this become an issue. Very often spouses will name each other as the primary beneficiary on nonprobate assets such as retirement accounts and life insurance policies. That means that the surviving spouse will become the owner of the asset anyway. In fact, for retirement accounts, naming your spouse as the primary beneficiary may have some tax benefits such as the ability for your spouse to rollover your retirement account into a spousal rollover IRA so that he or she may continue to receive the tax deferred growth on the account.

What are your options if your spouse named someone other than you as a beneficiary on a community property life insurance policy or retirement account?

California Probate Code Section 5021 states that: 

 (a) In a proceeding to set aside a nonprobate transfer of community property on death made pursuant to a provision for transfer of the property executed by a married person without the written consent of the person’s spouse, the court shall set aside the transfer as to the nonconsenting spouse’s interest in the property, subject to terms and conditions or other remedies that appear equitable under the circumstances of the case, taking into account the rights of all interested persons.

(b) Nothing in subdivision (a) affects any additional remedy the nonconsenting spouse may have against the person’s estate for a nonprobate transfer of community property on death without the spouse’s written consent.

Therefore, a court is permitted to set aside a nonprobate transfer of community property (for example, the naming of someone other than a spouse as a beneficiary of a community property retirement account) if the other spouse does not consent.

Many financial institutions forms and life insurance forms have a place where spousal consent must be indicated by his or her signature. That being said, if there is no place for a spouse to sign, you should contact the financial institution to see about how to fulfill this requirement.

There are a whole class of assets that pass without the need for probate, if you've properly named beneficiaries on those accounts. These include life insurance policies, pay-on-death accounts, and retirement plans (e.g., IRAs, 401ks, etc.).

If you acquired any of these assets during marriage, and absent an agreement between you and your spouse to the contrary, each spouse should have a 1/2 interest in each since they would be considered community property. Therefore, even if you've been funding your 401k plan at work with your salary, because that salary is considered community property, your spouse has a 1/2 interest in the account.

Because the law recognizes the community property nature of these assets, if you want to name a beneficiary for your 401k (other than your spouse), your spouse must consent and typically must also sign the beneficiary designation form waiving his or her right.

Check out California Probate Code Section 5020, which states:

"A provision for a nonprobate transfer of community property on death executed by a married person without the written consent of the person’s spouse (1) is not effective as to the nonconsenting spouse’s interest in the property and (2) does not affect the nonconsenting spouse’s disposition on death of the nonconsenting spouse’s interest in the community property by will, intestate succession, or nonprobate transfer."

If you're like many clients, you have probably never checked on the beneficiary designations on assets such as life insurance policies or retirement accounts since you acquired them. You might have acquired some of those accounts before you got married and named your parents or a sibling as the beneficiary.

Part of the estate planning process should entail you reviewing assets which are transferred by beneficiary designation to make sure they are up to date.