Does Putting Your House in a Trust Avoid Probate in California?

For many California homeowners, the house is the most valuable asset they own. It may also be the asset they're most concerned about when creating an estate plan.

One of the questions we hear frequently is: If I put my house in a living trust, will it avoid probate in California?

In many cases, the answer is yes. A home that is properly transferred into a living trust can generally be administered through the trust rather than through probate after the owner's death.

But there is an important part of that answer that shouldn't be overlooked: the house actually has to be properly transferred into the trust.

Simply creating and signing a living trust does not automatically place your home—or your other assets—into it.

Here's what California homeowners should understand.

Why Would You Want Your House to Avoid Probate?

Probate is a court-supervised legal process used to administer certain property after someone dies.

If you die owning property in your individual name and there isn't another method for that property to transfer, probate may be necessary, depending on the circumstances and applicable California law.

For families, this can mean dealing with the court system at the same time they're grieving the loss of a loved one.

Probate can also involve attorney fees, executor or administrator fees, court costs, paperwork, and delays before property can ultimately be transferred.

California does have procedures that may allow certain estates or property to be transferred without a full probate proceeding, depending on the circumstances and value of the property. But for many homeowners, avoiding probate remains an important reason to consider a living trust.

How Does a Living Trust Help Your House Avoid Probate?

A revocable living trust is a legal arrangement that can hold title to property during your lifetime.

When you create the trust, you will typically serve as the initial trustee. That means you can generally continue living in your home and managing it much as you did before.

You can potentially sell the home, refinance it, or make other decisions regarding the property, subject to the terms of your trust and other applicable requirements.

The important difference is how ownership of the property is structured.

When real estate has been properly transferred into your living trust, the trust continues to hold the property after your death. Your chosen successor trustee can then step in and administer the property according to the instructions contained in your trust.

Because the house is owned through the trust rather than solely in your individual name, it will generally not need to pass through probate solely to transfer ownership at death.

Creating a Trust Isn't Enough

This is where one of the biggest estate planning mistakes occurs.

Someone meets with an attorney, creates a living trust, signs all the documents, puts everything into a nice estate planning binder and assumes the job is finished.

Years later, the family discovers that the house was never actually transferred into the trust.

A living trust can only control property that is properly connected to it.

For real estate, funding a trust will commonly involve preparing and recording an appropriate deed transferring the property to the trustee of the trust.

Exactly how this should be handled depends on the property, ownership structure, trust, mortgage, title issues and individual circumstances.

This is why funding a living trust is just as important as creating one.

Can You Put a House With a Mortgage Into a Trust?

This is another question California homeowners frequently ask.

Having a mortgage does not necessarily prevent a home from being transferred into a revocable living trust.

The mortgage and ownership of the property are related, but they aren't exactly the same thing. Transferring title to a properly structured trust does not automatically mean you've paid off or eliminated the mortgage.

However, mortgages, deeds of trust, lender requirements and federal and state law can make individual situations more complicated.

Before transferring mortgaged real estate, homeowners should understand how the transfer affects their particular property and loan rather than simply preparing a deed they found online.

What Happens to the House After You Die?

This is one of the biggest advantages of creating a personalized living trust.

You decide.

For example, your trust might instruct your successor trustee to sell the home and distribute the proceeds among your children.

You might want the home transferred directly to a particular beneficiary.

In other circumstances, you may want someone to have the ability to live in the property for a certain period before it eventually passes to another beneficiary.

Families with minor children, blended families, rental properties, multiple homes or other special circumstances may require considerably more planning.

There isn't one correct set of instructions for every family.

That's the point of creating an estate plan specifically for your circumstances.

Does a Living Trust Avoid Probate for Everything You Own?

Not necessarily.

Putting your house into a trust doesn't automatically place everything else you own into that trust.

You might have bank accounts, investment accounts, business interests, vehicles, retirement accounts, life insurance policies and other assets.

Different assets may require different estate planning strategies.

Some property may be appropriately titled in a trust. Other assets may pass according to beneficiary designations or other methods.

Retirement accounts in particular require careful consideration before making changes to ownership or beneficiary designations because of potential tax consequences.

Your estate plan should therefore be viewed as a complete system rather than simply a trust document.

What If You Already Have a Living Trust?

If you created a trust several years ago, pull it out and take another look at your overall plan.

Then ask yourself a few questions.

Is your current home actually titled in the trust?

Did you purchase a different home after creating your estate plan?

Have you purchased rental property?

Have your bank or investment accounts changed?

Have you refinanced your home?

Have you gotten married or divorced?

Have children or grandchildren been born since the trust was created?

Has one of your chosen trustees or beneficiaries passed away or is that person no longer someone you would choose today?

A trust created ten years ago may still be perfectly valid, but your life may look very different today.

Estate planning shouldn't necessarily be something you do once and never think about again.

What If Your House Was Never Put Into the Trust?

This can become a significant issue.

If someone intended for a home to be part of a trust but died while the property remained outside of it, the family may have additional legal options depending on the circumstances.

But those options can involve legal proceedings, additional expense and uncertainty.

It's much better to identify and correct funding issues while the person who created the trust is still alive and able to address them.

That's why reviewing how your assets are titled is such an important part of estate planning.

Is Putting Your California Home in a Trust Right for You?

For many California homeowners, a revocable living trust can be an effective tool for keeping a home out of probate and providing clear instructions about what should happen to the property.

But a trust isn't simply a document you sign.

It needs to be properly drafted, properly funded and coordinated with the rest of your estate plan.

Your home may be your largest financial asset. More importantly, it may represent decades of work and countless family memories.

It's worth making sure you know exactly what will happen to it.

Talk to a California Estate Planning Attorney

If you own a home in California and are wondering whether placing it in a living trust could help your family avoid probate, Yu & Yu Law can help you understand your options.

We believe estate planning should be specific to the person and family we're helping. Your property, finances, family relationships and goals are unique, and your estate plan should reflect that.

If you already have a living trust, we can also help you review your existing estate plan and determine whether your home and other assets are properly coordinated with it.

Contact Yu & Yu Law to schedule an estate planning consultation and make sure the plan you've created will work when your family needs it most.