You can’t pour from an empty cup – funding your Trust properly
As an estate planning attorney, I am quite fond of the benefits of a Revocable Living Trust for certain clients under certain conditions. It is an excellent tool for estate planning that allows clients to keep their estates private, to administer their estates efficiently when the time comes, and very often, to avoid the probate process.
Some attorneys differ as to their opinions on the probate process. Some advocate for a will-based estate plan, which under certain conditions will often necessitate probate. Their argument is that the informal probate process in this state is relatively easy and straightforward. But the probate process comes with both pros and cons. Sometimes a little probate isn’t’ a bad thing. Other times, under certain circumstances, it’s a process better avoided if one has the opportunity. I can address those differences in another article down the road.
What I’d like to talk about is how to establish one’s Revocable Living Trust so that the probate process is avoided. Many folks will spend good money to have an attorney create a trust for them and then forget to consider the next step – funding their trust. A trust is a merely collection of words on a paper unless it has an asset to hold and eventually distribute.
Think of a trust as a giant cup, a reservoir of sorts. You have to put something into that cup – to hold for a future date so that it can make distributions down the road. A trust won’t reach outside of itself to govern your estate, you must select what assets it will govern by pouring those assets into that cup.
When the cup is dry, when the assets that are in your estate at your passing are outside of the trust, then we need the court’s involvement. As a big picture concept, probate is the courtinvolved process of retitling the assets of a deceased person. Simply put. You cannot transfer property or change the name on assets of a deceased person without the proper legal means of doing so. You have to get the court’s involvement in the absence of something like a trust or payable on death designation, for example. Walking into a title company with a last will and testament or a power of attorney won’t cut it.
In order to properly fund a trust one needs to transfer assets into the name of the trust, or in those cases when a trust purchases property such as a house or an insurance policy, the asset will be titled in the name of the trust. These things are easily accomplished. Executing a new deed or updating beneficiary designations on a certain asset are ways to accomplish this.
If these things aren’t accomplished – if a trust is not funded properly – then it is possible that a probate will need to be opened, to either fund the trust or transfer the property. At this point, however, an attorney would need to be hired and, as a result, the unnecessary costs of a probate would be incurred. Add to that the required time a probate needs to remain open, the period of creditors claims, and the exposure of one’s estate to the public – often the very things a person chose to avoid by getting a trust – will come to pass because they didn’t fund their trust appropriately. The moral of the story is that you can’t pour from an empty cup – and this is good advice in more ways than one. If I can help, I’m here.
