What Happens to Property Not Titled in Your Trust?

One of the most important steps in California estate planning is creating a living trust, which can help protect your assets and ensure that your wishes are carried out efficiently when you pass away. However, simply having a trust is not enough; you must also make sure that your property is properly titled in the trust’s name. Otherwise, you may not receive the full benefits of having a trust. What happens to property not titled in your trust? Here’s a breakdown.

What Happens to Property Outside the Trust?

When a property is not titled in the name of your revocable trust, it is generally not governed by the terms of the trust and may have to go through the California probate process. Probate is the court-supervised process of distributing your assets after you die. California probate proceedings are time-consuming, expensive, and public. If avoiding probate was one of your goals when creating a trust, failing to re-title property can undermine that objective.

Here’s what can happen to different types of property not titled in your trust:

1. Real Estate

If you have real estate, such as a home or vacation property, that is not transferred to your trust, it will be subject to probate unless the value is less than $61,500. In California, almost all real estate exceeds this value, unless the real estate is a rural plot of bare land. 

Probating real estate can delay the transfer of ownership to your heirs. The court fees and legal costs associated with probate will likely reduce the overall value of your estate.

2. Bank Accounts and Investments

Bank accounts, stocks, bonds, and other financial assets not included in your trust may also need to go through probate if the value exceeds the California probate threshold of $184,500. In some cases, if these accounts have a named beneficiary, they can transfer directly to that person without probate. However, if there’s no beneficiary or the named beneficiary has passed away, the assets will be subject to probate.

3. Life Insurance and Retirement Accounts

Life insurance policies and retirement accounts (like IRAs or 401(k)s) generally pass to the named beneficiaries upon your death, avoiding probate. However, if you forget to update beneficiaries or don’t name any, these assets could also end up in probate. It’s often recommended to name your trust as the contingent beneficiary to ensure that your assets align with your overall estate plan.

Alternatives to a Full Probate Proceeding

Depending on the circumstances, if assets are accidentally left outside of a trust, there may be alternatives to a full probate proceeding. These strategies include:

• Small Estate Affidavit
• Spousal Property Petition
• 850 Petition (aka Heggstad Petition)

Read our full blog post on this topic for a full explanation of these alternatives.

How to Avoid These Pitfalls

The optimal solution is preventing probate exposure by funding your trust properly. This means making sure that all the appropriate assets are retitled in the trust’s name. Depending on the type of property, this could involve updating deeds for real estate or changing the ownership of bank or investment accounts to yourself as trustee of your trust.

For certain assets, like retirement accounts and life insurance policies, it might not be necessary to retitle them into your trust. Instead, you can name the trust as a beneficiary or contingent beneficiary to ensure that those funds are used according to your estate plan.

The Importance of Regular Reviews

Creating a trust isn’t a one-time task. Life changes, such as acquiring new property, selling assets, or the birth of new beneficiaries, require you to review and update your trust regularly. We recommend scheduling a trust review appointment with an attorney every five years to ensure that your assets are titled properly and that your estate plan still reflects your wishes.

As you acquire new assets, be sure to transfer them into your trust. For example, if you purchase a new home, make sure that the deed is titled in the name of the trust to avoid the property going through probate. Likewise, if you inherit assets or receive a financial windfall, ensure that those are promptly transferred to the trust.

If you’re unsure whether all of your assets are properly titled in your trust, or if you need help reviewing your estate plan, consult an experienced estate planning attorney who can advise you. At the Law Offices of Daniel A. Hunt, we offer new clients a no-cost trust review and a special reduced client rate for returning clients to meet with an attorney and ensure that your estate plan is up-to-date.

If you have any questions about what happens to property not titled in your trust, feel free to contact our law firm. 

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.