What Happens to Property Not in a Trust in California?

When it comes to estate planning, many believe creating a living trust automatically includes all assets. However, unless you actually transfer the title of the property into your trust, those assets may still go through probate.
In California, property not titled in your trust can be subject to probate, delaying distributions, increasing costs, and exposing your estate to public scrutiny.
At Desert Law Group, we’ve been helping families in California protect their estates since 2001. Here, we’ll explain what happens to property left out of a trust, common mistakes, and ways to avoid probate.
The Importance of Funding Your Trust
A trust is a powerful tool in estate planning that can provide benefits like protecting your assets from creditors, reducing certain taxes, and ensuring a smooth transfer of wealth to your beneficiaries.
However, the key to unlocking these benefits lies in properly funding your trust. Simply creating a trust without transferring your assets into it can leave your estate exposed to probate.
Probate is the legal process of validating a will, settling debts, and distributing assets. In California, this process can take months—or even years—and may cost your estate thousands of dollars in court fees and attorney costs.
Worse, probate is a public process, meaning your family’s financial matters can become part of the public record.
Common Mistakes when Funding a Trust:
- Forgetting to retitle real estate into the name of the trust.
- Not updating financial accounts, like bank or investment accounts.
- Overlooking personal property and leaving it unaddressed.
- Assuming naming beneficiaries for certain assets means they don’t need to go into the trust.
What Happens to Property Not in a Trust?
As said earlier, assets that are not placed in your trust or otherwise accounted for may be subject to probate. Let’s break down what this means for various types of property.
Real Estate
Real estate that isn’t titled in your trust will likely need to go through probate. This includes your primary residence, rental properties, or undeveloped land.
Probate courts will determine ownership and oversee the distribution, which can delay the process and rack up costs.
To avoid this, you can sign a deed transferring ownership to your trust. For California properties, a commonly used option is a revocable transfer-on-death deed; however, it’s not a substitute for a trust in complex situations.
Bank Accounts and Investments
Bank accounts or investment portfolios not titled in your trust may also end up in probate. Even if you’ve set up joint accounts or pay-on-death designations, these methods might not offer the comprehensive protection a trust provides.
You should work with your financial institution to retitle accounts into your trust. This ensures they’re managed according to your wishes, both during your lifetime and after.
Life Insurance and Retirement Accounts
Life insurance policies and retirement accounts are a bit different. These assets typically pass directly to the named beneficiaries without going through probate. However, failing to review or update your beneficiary designations can create unintended complications.
Make sure your trust is named as a contingent beneficiary, so the proceeds can be managed according to the terms of your trust if the primary beneficiary cannot inherit.
Personal Property
Items like jewelry, collectibles, vehicles, and family heirlooms can be tricky. They often don’t have titles, making it harder to track and transfer ownership.
A pour-over will act as a safety net in this case, ensuring personal property that hasn’t been formally transferred into your trust will eventually be added to it. However, this process still requires probate, so it’s better to proactively address these assets.
Strategies to Avoid Probate
There are steps you can take to avoid probate altogether, even for assets not initially placed in your trust.
Heggstad Petition
A Heggstad Petition allows you to transfer assets into a trust after someone’s death without going through full probate, provided you can prove the decedent intended those assets to be part of the trust. This can be a lifesaver in situations where assets were accidentally left out. However, whether a Judge would grant the petition is depending on the specific Judge and the common practice in the particular county.
Pour-Over Will
As mentioned earlier, a pour-over will direct any remaining assets not already in the trust to be transferred into it after your death.
While it’s a backup plan, it shouldn’t be your first line of defense because it doesn’t completely bypass probate.
Regular Review and Updates
Estate planning is not a “set it and forget it” process. Certain life changes like buying a new home, opening a new account, or inheriting property mean your trust needs to be updated regularly.
Make it a habit to review your estate plan every year or after any major life event.
Secure Your Assets: Contact Desert Law Group
Estate planning is a meaningful way to protect your loved ones and secure your legacy. At Desert Law Group, we’ve helped families in Palm Springs create personalized plans since 2001, providing peace of mind and financial security.
Call us at 760-239-5661 to schedule a consultation. Whether you’re setting up a trust or transferring property, our team is here to help you every step of the way. Take control of your legacy today.