Property that isn’t titled in a trust doesn’t have the protections that come with a trust. In many cases, it means the property must go through probate, but there are some exceptions. Find out more about what happens to property in California that’s not in a trust when you pass away below.
What Does It Mean for Property to Be Titled in a Trust?
When you create a trust, you must fund it before it can be of use. Even if you specifically name assets in the creation of the trust, they aren’t held in the trust unless you take this step. For real property, such as a home, that means changing the deed so that it’s titled in the trust.
If you’re creating a living trust during your lifetime, you can put real property you own into the trust by transferring the deed. This effectively splits the ownership rights to the property. The legal title to the property, and technically the legal ownership of the property, is held by the trustee. The equitable rights to the title, or the rights to the benefits of the property, are held by the beneficiary.
In the case of a living trust, you may name yourself as the beneficiary while you are still alive. When you pass away, the equitable rights to property in the trust pass on to your successor beneficiaries. In this way, the benefits of the property in the trust can pass on to those successor beneficiaries without going through any type of probate process. They are simply passed along in keeping with the rules of the trust.
These advantages—seamless transfer of benefits and skipping probate—can’t occur if the property in question isn’t titled in the trust.
How Can a Heggstad Petition Help?
However, California law does recognize that there are times when an asset that was legitimately meant for a trust is not titled in the trust when a person passes away. This might be because of an oversight—perhaps the property is directly named in the trust documents but someone forgot to attend to the transfer of the title. Or, perhaps the grantor of the trust (the person who created the trust in the first place) passes away before the paperwork to transfer the title can be completed.
For whatever reason, if a property is left out of a trust but it’s clear that it should have been included, you can file a Heggstad Petition. This petition can be filed during trust litigation or probate. The goal of the petition is to demonstrate to the court that an asset is listed on the trust’s Schedule of Assets and was obviously meant to be part of the trust even though the property isn’t titled in the trust.
If a Heggstad Petition is successful, the court allows the title to be transferred to the trust. This means the property is passed on as the trust intended and not according to standard probate practices.
What Assets Transfer on Death?
In some cases, you may not need to worry about whether or not assets are appropriately titled in your trust. Transfer-on-death assets automatically transfer to the beneficiary or joint owner without going through probate.
Common examples of transfer-on-death assets are checking and savings accounts. Most banks let you complete paperwork to identify a beneficiary for such assets. If you are the sole account holder and you pass away, the funds in the account automatically transfer to the beneficiary. Life insurance policies and some retirement accounts have similar options. California transfer-on-death deeds may provide a way for you to transfer a home or other real estate to someone automatically upon your death.
Note that in cases where assets are jointly owned, one owner may automatically receive the sum total of the assets if the other owner passes away. For example, if a husband and wife have a joint checking account and the husband passes away, the wife is likely to automatically become the sole owner of the funds without any need for probate. It’s important to read and understand the fine print on any account, though, so you understand what might happen to it when you pass away.
Why It’s Important to Plan Ahead for Estate Administration
If you don’t have a will, trust, or other estate planning documents completed when you pass away, your assets are distributed according to California law. While you can rely on transfer-on-death accounts to some degree, these are not failsafes to keep all your assets out of probate or ensure your property is divided among your heirs as you might wish.
Taking the time to complete an estate plan ensures your wishes are documented and protected by legal documents and processes. An experienced estate planning lawyer can help you understand your options and what estate planning tools would be best to protect your own interests, your assets, and the interests of your beneficiaries in the future.
It’s never too early to start planning for your legacy. In fact, starting sooner rather than later gives you time to consider your wishes and consult with a lawyer. It also mitigates issues that can come up when estate planning is rushed, such as not having the right properties titled in your trust.
To get started on estate planning, contact Barilari & Williams, LLP, today.