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What Happens to Property Left Out of Your Revocable Living Trust?

Posted on 08 Jun 2011 by admin | Filled under: intellectual-property

It's not always possible to have a perfectly-funded Revocable Living Trust. Sometimes, a trust maker acquires new property and forgets to transfer it into his or her trust. Sometimes, he or she acquires new property and just doesn't have a chance to fund it into the trust before passing away. In other situations, the property just doesn't lend itself to being transferred into the trust.

So, what happens to property that isn't funded into your Revocable Living Trust before you pass away? It depends on the type of property.

Joint Property

If you hold property with another person as Joint Tenants With Rights of Survivorship, as is often the case with real estate or bank accounts, then, upon your death the property passes to your co-owner without the need for probate.

If you hold property jointly as tenants in common, on the other hand, then things are a little trickier. When you hold property as tenants in common, then your share of that property is actually treated like an individual interest in that property, so when you pass away, it's subject to probate.

Title by Contract

Other property may be owned by you, but another person has rights to the property via contract. This is the case with payable on death accounts and life insurance accounts, as well as retirement accounts. These types of property pass to the designated beneficiary (the person with contractual rights to the property) outside of the probate process.

Individual Property

Property that you own individually, meaning anything titled in solely in your name without a beneficiary designation, as well your share of real estate owned as a tenant in common, has to go through the probate process before it can be distributed to your heirs or beneficiaries.
Because of this, it's a good idea that anyone who has a Revocable Living Trust also have a Pour-Over Will. This type of will simply "catches" any of your individual property that's left out of your trust, and, after the property goes through the probate process, "pours" the property into your trust. So, even though the property has to go through probate, it still ends up in your trust, to be distributed to your intended beneficiaries.