Revocable Living Trusts are flexible estate planning tools. They can, among other things, avoid probate and streamline estate administration after a death. They can also assist during a Trustor’s lifetime by avoiding the potential need for a guardianship. These benefits are well known. However, what is sometimes overlooked is that a Trust is not the same as a Will. A Will is drafted and signed with no additional work needed other than a periodic review to make sure it’s terms are still appropriate. A Trust is also drafted and signed. But once you leave your lawyer’s office with your newly signed trust documents, a great deal of work still needs to be done. This is the funding of your trust. In order to deliver the benefits that make Trusts so popular, the trust must be funded. This means that ownership of your property needs to be transferred to your Trust. It is unfortunate that this important second step is so often overlooked.
We meet often with children who bring in Mom and Dad’s Living Trust documents. The Trust usually appears to be professionally done. It is clear that Mom and Dad likely paid a substantial fee to have it drafted. Yet when we start discussing what property is owned by Mom and Dad’s trust we get blank stares. Further discussion establishes that no assets were ever transferred to the Trust or, some assets were transferred when the trust was first created, but those assets have been sold and others purchased that have not been transferred to the Trust. When this happens, we have the unpleasant task of advising the kids that, despite Mom and Dad’s well drafted Trust, a probate is still needed to transfer their assets to their Trust so that they can be administered and distributed as the Trust directs.
Even when Mom and Dad are diligent and transfer all of their Arizona property to their trust, it is not uncommon that out of state property is never transferred. Where this happens, the result is the same, a probate is needed.
Be sure and discuss this important aspect of creating a trust with your estate planning attorney. Most estate planning attorneys will have detailed written instructions to assist you in funding your trust. If help is needed, your estate planning attorney can work with you to make sure that your trust is appropriately funded. Once done, your job is to remain vigilant to make sure that any new assets are titled in the name of your Trust.
The lawyers at Platt and Westby, P.C. would be pleased to answer any estate planning questions you may have.