What happens to assets not in a trust when someone dies?

Setting up and funding a revocable living trust is prudent estate planning. By placing assets in a living trust, you’re sparing your family the expense and time involved in probate.

But what happens if you’ve acquired new assets that have not been transferred to the trust at the time of death? When someone dies, assets not in their trust must be probated with some exceptions. Assets that move directly to a named beneficiary, such as the proceeds from a life insurance policy, certain types of property ownership, investment accounts with transfer on death (TOD) designations, or retirement accounts would be exempt from probate.

If you die without creating a will, assets that have not been placed in your trust will be distributed to family members according to the laws of intestate succession in your state. If you don’t leave behind a spouse or children, state laws, in general, leave your assets to other family members in this order:

  • Your grandchildren
  • Your parents
  • Your siblings; if deceased, to nieces and nephews
  • Your grandparents; if deceased, to aunts and uncles

Can probate be avoided?

The purpose of the California probate laws is to regulate that way in which an estate is administered after the owner has died. Probate isn’t always required after you’ve died if you owned assets in joint tenancy with another person or as survivorship community property with your spouse. This also applies to assets in your trust. However, assets that are not in your trust may not have to go through the probate process if their total value is less than $150,000.

If the value is $150,000 or more, the executor of your estate files your will along with a document called “Petition for Probate” with the probate court in the county where you lived. If you didn’t have a will, a family member asks the probate court to be appointed as “administrator” of the estate.

Step by step process

Probate is a step by step legal process which can take anywhere from six months to a year to complete. In California, lawyers are allowed to charge a “statutory fee” which is a percentage of the value of the assets that must go through probate. These fees can be very costly vs the amount of actual work done.

Another option is to create a “pour over will” which is often used in conjunction with a living trust. Under the terms of the pour over will, after the death of a loved one, all his or her assets pass through the will into his or her trust. Distributing the assets to the beneficiaries named in the trust is a simple matter because everything is controlled by one document.

At the San Diego Law Office of David W. Foley, our comprehensive trust package includes a pour over will. Contact our office to schedule an appointment with one of our estate planning attorneys.

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