Having a trust does not automatically mean every asset will bypass the court-supervised probate process. In our recent blog, we explained how a properly funded living trust helps assets avoid probate.
How an asset is titled, whether it was properly transferred into the trust, and whether it has a beneficiary designation or another transfer method can affect what happens to it after someone dies.
In this blog, we'll take a closer look at the different paths assets may take. Understanding these can make a critical difference when creating and maintaining an estate plan.
Arizona estate attorney Rilus Dana also explains these different paths in Part 2 of our YouTube video series on probate. Here, he breaks down, in plain English, when a trust can help an estate avoid probate, when assets may pass directly to beneficiaries, and when other options may be available.
Path 1: Assets Owned by a Living Trust
When an asset transfers into a trust, the trust becomes the owner, not the individual. When the trustor, or the person who created the trust, dies, the successor trustee steps in. The successor trustee can then manage or distribute the trust-owned assets according to the trust's instructions.
Because the trust already owns the asset, it generally does not need to go through probate. That is why most families create a living trust: to keep assets out of probate.
However, as you can see, avoiding probate depends heavily on proper ownership transfers. This process, which estate attorneys call funding the trust, is critical because the trust can control only assets actually transferred into it.
That is why creating a trust isn't the same as funding it.
A perfectly drafted trust would be powerless if it’s not properly funded.
Imagine your parents having a living trust years ago. If their home title remains in their names and isn't transferred into the trust, this asset may need to go through probate.
Estate planning doesn't end when you sign trust documents. Asset ownership and titling matter, too.
Path 2: Assets May Pass Directly to the Beneficiaries
Some assets can avoid probate and don’t need to be in a trust. These assets have built-in methods for transferring ownership upon death.
Examples of assets that may pass directly to the beneficiaries are:
Life insurance policies
Retirement accounts
Payable-on-death (POD) accounts
Transfer-on-death (TOD) accounts
Certain assets owned jointly with rights of survivorship
Most of these assets allow the owner to name a beneficiary who receives the asset after the owner's death. When an asset has a valid beneficiary designation, they do not become part of the probate estate.
Because not every asset is treated the same, there is no straightforward answer to whether an estate with a trust will go through probate. This is also why estate planning depends on every person’s unique asset type, structure, and goals.
In general, your overall estate plan should include your accounts with beneficiary designations.
If the designations don't align with your trust or will, complications can arise that may prevent the assets from being managed as you intended.
For example, your trust may direct that all your assets be divided among all your children. However, a life insurance policy you created years before may have a beneficiary designation indicating that 100% of the benefits go to your first child.
Not regularly reviewing and coordinating your estate planning documents can create issues and conflicts that may lead to probate.
Path 3: Assets Left Outside the Trust Need a Pour-Over Will
A pour-over will adds an extra layer of protection by capturing assets not included in a trust.
The idea is simple: if the trustor, or creator of the trust, dies leaving behind assets not transferred into the trust, the pour-over will directs those assets into the trust.
This strategy generally helps prevent probate. However, probate may still be necessary in some instances. For example, if large assets are involved, probate may be required before transferring the assets into the trust.
A pour-over will is only effective if there is a properly funded trust in the first place.
Thus, a pour-over will is not a substitute for a living trust, but simply its supplement. It’s a safety net meant to catch assets the trust missed.
While you can rely on the safety net, it’s still a better practice to regularly update your trust and coordinate all estate planning tools during your lifetime.
Path 4: Small Estate Affidavit Process in Arizona
If you live in Arizona and have a small estate, probate may not be the only option.
If there are assets not transferred into the trust at the time of a person’s death, their family can bypass a full probate proceeding in Arizona through the small estate affidavit process.
If an estate meets set criteria and requirements, certain personal property, such as bank accounts, vehicles, and securities, may only require the heir to file an affidavit at least 30 days after death to manage the transfer. As of this writing, the statutory limit for the value of the personal property to qualify is $200,000 after liens and encumbrances.
Arizona also has a separate procedure for certain interests in real property.
For qualifying real property, the current limit is $300,000 after liens and encumbrances, and at least six months must have passed since the person's death.
For families who meet the limits and requirements, these procedures can be valuable alternatives to full probate. However, success still depends on the estate's circumstances, the type of property involved, applicable waiting periods, debts, and other factors.
So, while useful, these procedures are not the automatic solution for every estate that seems small.
Path 5: Assets that Require Probate
The assets that do not fit the first four paths may need probate.
In general, probate covers assets owned individually that:
Lack a valid beneficiary or survivorship provision to transfer them outside probate,
Are not properly held in a trust,
And do not qualify for another simplified process.
Imagine owning a bank account solely in your name with $500,000. The account names no beneficiary designation, was never transferred into a trust, and the estate does not qualify for a small estate procedure.
When you pass, this asset may need to be addressed through probate before it can be distributed to the appropriate heirs or beneficiaries.
An estate going through probate does not necessarily indicate that you failed at estate planning.
Probate is simply the standard path for assets not structured to pass another way.
Alternatively, successful estate planning does not mean eliminating every possibility of probate. The goal is to transfer specific assets to your beneficiaries without unnecessary complications. Probate, while it has some disadvantages, is simply one method to reach this goal.
An Estate May Follow More Than One Path
When planning your estate, remember it doesn't have to follow a single path. Because an estate can have varying asset types, values, and structures, it may have to follow multiple paths to reach your intended goal.
For example, if your estate consists of:
A home properly titled in a living trust
A retirement account with a named beneficiary
A jointly owned bank account with a right of survivorship
An individual investment account with no beneficiary designation
Your successor trustee may handle your home, your retirement account may pass directly to its named beneficiary, the jointly owned account may pass to the surviving owner, and the individual investment account may need probate if no other simplified option applies.
So, if you claim, “I have a trust, everything is covered,” you may be operating under a false sense of security. The trust may handle some assets, but not all.
Take the Best Path with Rilus Law
Estate planning doesn't have one path. But you can choose the one that best fits your assets, beneficiaries, and other considerations.
If you are unsure which path applies to your unique situation, you do not have to figure it out alone. Rilus Law helps families understand the estate administration process and determine what steps may be necessary.
Your estate plan should be more than a set of documents. It should be a plan that works when you need it the most.
Frequently Asked Questions
Does a living trust automatically avoid probate in Arizona?
No. A living trust only avoids probate for assets that are properly retitled and transferred (funded) into the trust. If an asset remains solely in an individual's name without a valid beneficiary designation or survivorship provision, it may still require probate.
What happens if an asset is left out of a living trust?
If an asset is left out of the trust, a pour-over will acts as a safety net to direct that asset into the trust after death. However, if the asset's value exceeds Arizona's small estate affidavit limits, it may still need to go through the probate process before reaching the trust.
What are Arizona's limits for small estate affidavits?
In Arizona, smaller estates can bypass full probate using a small estate affidavit. Personal property (such as bank accounts, vehicles, and stocks) up to $200,000 in value can be transferred after a 30-day waiting period, while qualifying real estate equity up to $300,000 can be transferred after a six-month waiting period.
Which assets avoid probate without being in a living trust?
Assets with built-in transfer mechanisms pass directly to beneficiaries outside of probate. These include life insurance policies, retirement accounts, payable-on-death (POD) accounts, transfer-on-death (TOD) accounts, and property owned jointly with rights of survivorship.
Can an estate follow more than one path after someone dies?
Yes. An estate often follows multiple paths depending on how each asset is titled. For example, a home titled in a living trust is managed privately by a successor trustee, a retirement account passes directly to a named beneficiary, and an individually held account without a beneficiary may require probate or a small estate affidavit.
