For California residents navigating the complexities of transferring real estate and other assets through trusts, wills, or probate—here’s what you need to know to protect your family’s legacy.
Transferring property as part of your California estate plan should be straightforward. But in reality, many families encounter unexpected roadblocks that can delay distributions, trigger costly disputes, or even derail the entire transfer process. Whether you’re creating an estate plan now or administering a trust after a loved one’s passing, understanding these obstacles—and how to avoid them—can save your family thousands of dollars and months of legal uncertainty.
This guide is designed for California residents and anyone managing California-based real estate or financial assets who want to ensure a smooth, transparent transfer to the next generation. If you’re feeling anxious about the legal complexity of probate, trust administration, or property transfers, you’re not alone—and you’re in the right place.
Obstacle 1: Title Issues and Unclear Ownership
What it is: Title problems arise when the legal ownership of a property is unclear, incomplete, or encumbered by liens, judgments, or errors in public records. These issues can prevent a property from being transferred smoothly—whether through a trust, will, or probate proceeding.
Common scenarios:
A property was never formally transferred into the trust (known as “funding” the trust), so it remains in the decedent’s individual name and must go through probate
There are unresolved liens, unpaid property taxes, or mechanic’s liens that cloud the title
The deed contains errors, such as misspelled names, incorrect legal descriptions, or outdated ownership information
Co-ownership disputes arise when multiple heirs or beneficiaries have competing claims
How to overcome it:
Conduct a title search early: Before transferring property, order a preliminary title report to identify any clouds on title, liens, or other encumbrances
Ensure your trust is properly funded: Work with an estate planning attorney to confirm that all real estate is titled in the name of your trust, not your individual name
Clear liens before transfer: Pay off or negotiate outstanding debts, tax liens, or judgments to ensure a clean transfer
Correct title errors proactively: If you discover discrepancies in the deed, file a corrective deed or affidavit to resolve them before they become obstacles during transfer
Real-world impact: A Sacramento family discovered too late that their father’s home was never transferred into his living trust. The property had to go through a costly 9-month probate process, delaying the sale and costing the family over $25,000 in court fees and legal costs. Proper trust funding would have avoided this entirely.
Obstacle 2: Tax Implications and Unexpected Tax Liabilities
What it is: Property transfers—whether during life or after death—can trigger a range of tax consequences, including capital gains taxes, property tax reassessments, estate taxes, and income taxes. Many families are blindsided by these liabilities because they didn’t plan for them in advance.
Common tax traps in California:
Proposition 19 changes: As of February 2021, California’s Proposition 19 significantly limited the parent-child exclusion for property tax reassessment. Transferring a home to your children may now result in a substantial increase in property taxes unless specific conditions are met
Capital gains taxes: If property is sold after transfer, beneficiaries may owe capital gains taxes based on the difference between the sale price and the property’s tax basis (typically the value at the date of death, known as a “step-up in basis”)
Federal estate tax: While most California estates won’t owe federal estate tax (the 2026 exemption is approximately $13.99 million per individual), high-net-worth families must plan carefully to avoid this 40% tax
Income taxes on trust distributions: Certain distributions from trusts may be taxable to beneficiaries, depending on the type of income and how the trust is structured
How to overcome it:
Consult with a tax advisor and estate planning attorney: Before transferring property, get a clear picture of the tax implications and explore strategies to minimize taxes
Leverage exemptions and exclusions: Understand how Proposition 19 applies to your situation and whether you qualify for exceptions (e.g., transferring a principal residence to a child who will also use it as their primary residence)
Plan for capital gains: If beneficiaries plan to sell property, understand the step-up in basis rules and timing strategies to minimize taxes
Use trusts strategically: Certain trust structures, such as irrevocable life insurance trusts (ILITs) or qualified personal residence trusts (QPRTs), can help reduce estate tax exposure for high-net-worth families
Real-world impact: A San Francisco family inherited a rental property worth $1.2 million. They assumed the property tax rate would remain the same, but due to Proposition 19, the property was reassessed at market value, increasing their annual property tax bill by over $8,000. Proactive planning could have helped them explore alternative transfer strategies or prepare for the increased tax burden.
Obstacle 3: Trust Funding and Administration Issues
What it is: Even if you’ve created a revocable living trust, the trust is only effective if it’s properly funded (i.e., assets are transferred into the trust) and administered correctly after your death. Many families create trusts but fail to complete the critical step of funding them, or they encounter confusion and delays during trust administration.
Common trust-related obstacles:
Unfunded trusts: Real estate, bank accounts, and other assets remain titled in the individual’s name rather than the trust, forcing the estate into probate
Ambiguous or outdated trust terms: The trust document may contain unclear instructions, conflicting provisions, or outdated beneficiary designations that lead to disputes
Failure to update the trust: Life changes such as marriage, divorce, birth of children, or acquisition of new property require updates to the trust, but many people neglect to make these changes
Trustee challenges: The successor trustee may lack experience or understanding of their duties, leading to delays, errors, or conflicts with beneficiaries
How to overcome it:
Fund your trust completely: Work with your estate planning attorney to transfer all significant assets—real estate, bank accounts, investment accounts, and business interests—into the trust
Review and update your trust regularly: Revisit your trust every few years or after major life events to ensure it reflects your current wishes and circumstances
Clarify trust terms: Make sure your trust document includes clear, specific instructions for property transfers, distributions, and trustee powers
Choose and prepare your successor trustee: Select a trustworthy, organized individual (or professional fiduciary) to serve as successor trustee, and provide them with guidance on their responsibilities
Seek professional trust administration support: After a loved one’s passing, engage an experienced trust administration attorney to guide the successor trustee through the process, ensuring compliance with California law and avoiding costly mistakes
Real-world impact: A family in Sacramento inherited their mother’s trust, which included three properties and several bank accounts. However, the trust document was vague about how to divide the properties among four siblings, and one property was never transferred into the trust. The result: a contentious family dispute, a probate proceeding, and over $40,000 in legal fees. Clear trust terms and proper funding would have prevented this outcome.
How California Probate and Trust, PC Can Help You Avoid These Obstacles
At California Probate and Trust, PC, we specialize in helping California families navigate the complexities of estate planning, trust administration, and probate. Our experienced attorneys understand the unique challenges California residents face—from Proposition 19 implications to trust funding mistakes—and we provide clear, transparent guidance every step of the way.
Our services include:
Comprehensive estate planning: We create customized estate plans, including revocable living trusts, wills, powers of attorney, and advance healthcare directives, designed to protect your family and assets
Trust funding and review: We ensure your trust is properly funded and review existing trusts to identify and correct potential issues
Trust administration: We guide successor trustees through the trust administration process, ensuring compliance with California law and smooth, timely distributions to beneficiaries
Probate representation: If probate is necessary, we provide experienced, compassionate representation to navigate the court process efficiently
Property transfer and title services: We assist with transferring real estate into trusts, clearing title issues, and coordinating with title companies and tax advisors
We’ve helped thousands of California families protect their legacies, and we’re here to help you, too.
Take the Next Step: Schedule Your Free Consultation
Don’t let property transfer obstacles derail your estate plan or burden your loved ones. Whether you’re creating a new estate plan, updating an existing trust, or navigating trust administration or probate after a loss, we’re here to provide the expert guidance you need.
Schedule your free, no-obligation consultation today:
Call us at (866) 674-1130
Visit cpt.law to learn more and book your appointment online
Meet with our experienced attorneys in Fair Oaks, Sacramento, or San Francisco
We’ll take the time to understand your unique situation, answer your questions, and develop a personalized plan to protect your family and your legacy.
Source
This article is based on guidance from the Continuing Education of the Bar (CEB) California Estate Planning resource on property transfer obstacles.
Legal Disclaimer
This article is provided for informational purposes only and does not constitute legal advice. Estate planning, trust administration, and probate laws are complex and vary based on individual circumstances. The information presented here is based on California law as of February 2026 and may change over time. For advice tailored to your specific situation, please consult with a qualified estate planning attorney. California Probate and Trust, PC is available to provide personalized legal guidance to California residents and those managing California-based assets.
