Introduction

Many people believe that having a trust means their family can avoid probate. While this is often true, there are cases where an estate with a trust still ends up going through the probate process. As an estate planning attorney, I’ve encountered numerous situations where families face probate despite having a trust in place. In this blog post, I’ll explain why this might occur and outline the common reasons behind it.

Understanding the Misconception

A prevalent misconception is that a trust automatically avoids probate. In reality, a trust only avoids probate for assets properly connected to it. Probate is triggered by the way assets are titled at death, not by the mere existence of a trust.

Reasons Why Trusts End Up in Probate

• Assets Never Funded into the Trust A major reason trusts go through probate is because assets were never actually transferred into it. It’s common for people to have a trust on paper, while significant assets like real estate or bank accounts remain in their personal names. When individuals pass away, these untitled assets can trigger probate if their value exceeds the state’s threshold.

• New Assets Were Never Added Even if a trust is initially funded, new assets acquired later are often not included. As people buy new homes, open accounts, or start businesses, they might neglect to update their trust with these additions. This oversight can result in partial funding, where only certain assets avoid probate.

• Beneficiary Designations Override the Trust Some assets pass directly based on beneficiary designations rather than trust terms, such as retirement accounts and life insurance. If these designations are outdated or incorrect, they can bypass the trust entirely, potentially even leading to probate.

• Real Estate Outside of California Trusts designed for California property might not cover real estate located in other states. Without appropriate titling into the trust, an ancillary probate might be necessary in the state where the property is located, adding complexity and cost.

• A Pour-Over Will Does Not Avoid Probate Although a pour-over will is commonly included in trust-based plans, it doesn’t avoid probate. It serves as a safety net by transferring leftover assets into the trust post-probate, which means if substantial assets remain outside the trust, they will still require probate intervention.

• Incorrect or Defective Titling Mistakes in titling—like incorrect trust names or missing trustee designations—can make the transfer of assets complicated without court authority, forcing families into probate.

The Reality of Probate

In California, probate isn’t a simple administrative task. It can involve lengthy court processes, expensive statutory fees, and a loss of privacy. What’s tragic is that many instances of probate could have been avoided with better follow-through.

Reducing the Risk of Probate

To mitigate these risks, it’s critical to ensure proper funding of your trust, conduct regular reviews, coordinate beneficiary designations, and update your estate plan as your assets change. Proper maintenance and funding of a trust significantly benefit families by helping them avoid the cumbersome probate process.

Conclusion

Owning a trust is an excellent step towards estate planning, but keeping it properly funded and maintained is crucial. Consider this a reminder to review your trust and make sure it functions as intended.

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William Ha is a California-licensed estate planning attorney. This article is for informational purposes only and does not constitute legal advice. Every situation is different, and you should consult an attorney regarding your specific circumstances.