What Happens to Property Not in a Trust?

Imagine this: You’ve worked hard to build your life and gather assets, but what happens if you haven’t placed them into a trust? Many people overlook this crucial step and the consequences can be frustrating, costly, and stressful for loved ones left behind. At Blacksburg Law, we focus on helping families avoid these headaches through thoughtful estate planning.

Let’s break down what happens when property isn’t part of a trust and why this matters for your estate.

What is a Trust?

A trust is a legal tool designed to manage and distribute your assets. Think of it as a container where you place property to ensure it’s handled according to your wishes. There are several types of trusts, such as:

• Revocable Living Trusts: You maintain control and can adjust it during your lifetime.
• Irrevocable Trusts: Assets are permanently transferred, often for tax or asset protection purposes.
• Special Needs Trusts: Designed to provide for loved ones with disabilities without affecting their benefits.

By placing property into a trust, you can avoid probate, maintain privacy, and simplify asset distribution.

What Happens to Property Not in a Trust?

If an asset isn’t in a trust, it’s typically subject to probate—a court-supervised process for distributing your property. Here’s what that looks like:

The Probate Process in California

Probate can be a long and expensive ordeal. Here’s a snapshot:

1. A petition is filed with the court.
2. Assets are inventoried and appraised.
3. Creditors are notified and paid.
4. The remaining assets are distributed to heirs.

This process can take six months to several years depending on the estate’s complexity. Costs can quickly add up, including:

• Court filing fees
• Executor compensation
• Attorney fees
• Appraisal and publication costs

In California, probate fees are often calculated as a percentage of the estate’s value, meaning larger estates face higher expenses.

Intestacy Laws

If you die without a will or trust, California’s intestacy laws determine who inherits your property. This might mean:

• Spouses and children receive assets first
• If no immediate family exists, extended relatives inherit
• No family? The state claims your property

This rigid system often ignores personal relationships, which could leave loved ones in difficult situations.

Challenges When Property Isn’t in a Trust

Not having a trust can lead to several avoidable problems:

• Delays in Distribution: Probate timelines can stall inheritance, leaving beneficiaries waiting for months or years.
• Increased Costs: Probate fees reduce the value of the estate, meaning less money for your heirs.
• Loss of Privacy: Probate is a public process, so anyone can access details about your estate and beneficiaries.
• Family Conflicts: Disputes often arise when there’s uncertainty about property distribution.
• Ancillary Probate: If you own property in multiple states, additional probate proceedings are required—creating even more complications.

How a Pour-Over Will Helps

A pour-over will acts as a backup to your trust. It ensures any assets accidentally left out of the trust are directed into it upon your death. However, keep in mind:

• Assets covered by a pour-over will must still go through probate
• It’s not a substitute for properly funding your trust during your lifetime

Small Estate Procedures in California

California offers simplified probate options for estates valued under $184,500 (as of 2024). While these might seem appealing, they come with limitations:

• Only certain assets qualify (e.g., no real property over $61,500)
• The streamlined process can still involve court oversight and delays

Relying on small estate procedures instead of a trust is a gamble—one that might leave loved ones with unexpected complications.

Real-Life Examples of Property Outside of a Trust

Property outside of a trust can take many forms, and understanding these examples is essential for effective estate planning. One common example that often comes up is the family home, which may or may not be included in a trust depending on the owner’s intentions and circumstances.

The Family Home

A homeowner passed away without transferring their house into a trust. Their children spent over a year in probate, accumulating thousands in legal fees before the property was distributed. During this time, they also had to pay ongoing property taxes and maintenance costs.

The Small Business Owner

A business owner with significant assets outside a trust passed away. Probate proceedings delayed access to funds, putting the company’s operations at risk. With proper planning, these disruptions could have been avoided.

Ready to Simplify Your Estate Plan?

Don’t let your hard-earned property get caught in a lengthy, expensive probate process. At Blacksburg Law, we help families create comprehensive estate plans that reflect their values and simplify life for their loved ones.

Reach out today for a consultation. Call us at (415) 508-5600 or visit our Contact Us page. Let’s work together to create a plan that works for you and your family.