What Happens to Property Not Included in a Trust?
You have probably heard over and over again that avoiding probate is a good idea, and that’s because it’s true! If you’re dealing with an estate in probate, you will face court costs, legal fees, and time lost. A slow-moving legal process, probate court cases have been known to take years. For that reason, many might wonder what happens to property not included in a trust and if they’ll be facing probate court.
However, if you’re doing some planning, know this: with the right estate planning attorney and the appropriate tools, your estate can avoid probate entirely! Not all estates are able to do this—often because the estate holder didn’t plan in advance. Other times, estates go through probate because not all the assets were properly managed.
What happens to property not included in a trust?
You know that assets titled to a trust can avoid probate. However, if you are dealing with an estate that is in probate, you need to know what happens to the property not included in a trust.
Homes, and other real estate, can still avoid the probate process without being held in a trust. Transfer-on-Death (TOD) beneficiary deeds allow the property to transfer directly from the owner to the named beneficiary. However, if the estate doesn’t have either of these protections for the property, avoiding probate can become difficult or impossible.
Property in Probate Court
The first step in the probate process involves submitting the deceased’s will to the court. The executor or a relative of the deceased will usually handle this step, and then the court will officially name or appoint an executor.
The executor then sends notice of probate to the designated heirs, and the process of distributing the estate begins. If there is no will—a condition known as “dying intestate”—the court will appoint an estate administrator who will perform the duties of an executor.
According to Arizona law, the “total value of the estate’s real estate must be less than $100,000.” Any higher valued properties will be subject to probate. A couple of different things can happen when real estate ends up in probate court.
- If a legal will exists, the judge will honor the instructions of the deceased and convey the property to the person(s) listed in the will. Sometimes the spouse or child receives the home. Other times the executor will sell the property and distribute the profits to the beneficiaries.
- Without a will, a trust, a TOD, or joint tenancy law, the probate judge will make a final decision on what happens to the property. The judge will often decide to leave the home to the next surviving relative, usually a spouse or child.
Probate Court Taxes
An estate in probate must pay taxes on any income earned both prior to and after the death of the benefactor. Examples of estate income include any dividends, royalties, and interest on financial accounts. Estate assets that are sold or transferred may also be subject to taxation, apart from income tax. Heirs of an estate may also have to pay income tax on inheritance.
How to Avoid Arizona Probate Court
For forty years, the team at Phelps LaClair has been helping Arizona residents successfully create estate plans that avoid probate. A revocable living trust that clearly designates your wishes can spare you and your heirs the unnecessary heartache and expense of probate court.
For a skilled estate planning attorney who can walk you through the process of protecting your assets, you can count on Phelps LaClair. We have the real-life experience you need to prevent the common estate planning mistakes others make. For expert estate planning in Phoenix, Chandler, Mesa, Scottsdale, and Glendale, contact us today.