If property is not properly transferred to a Living Trust (known as “funding” the trust), then the property must be administrated by a probate court in order to be property distributed to the heirs.
(This underscores the importance of properly funding a trust at the time the document is created, or as property is acquired by the Trust donors, as discussed several times within the content of Standard Legal’s Living Trust legal forms software.)
If no Last Will and Testament is in place upon death, then the property is distributed according to the state law in which the decedent lived prior to his or her death — meaning that state law will determine who gets the property. In most states, children (if there is no spouse of the decedent) will share ownership of property.
So bottom line, the distribution of any asset not covered in a Living Trust is determined by the probate court according to the state law in which the probate estate is administered.