A Revocable Living Trust is a useful estate planning tool that solves problems for some people, including the ability to avoid probate when probate might be excessively cumbersome or expensive. The trust avoids probate if all the trust maker’s assets are transferred into the trust prior to death, so that the trust rules determine what happens to the assets instead of the rules of probate. The key to making a Revocable Living Trust work is that it be funded, i.e., the trust maker’s assets are transferred into the trust. With real estate, this requires a deed. Bank account names need to be changed into the trustees and trust. The same is true for most investment accounts and other titled assets, like automobiles, boats, and airplanes.
Unfortunately, many people with a Revocable Living Trust did not receive good legal advice when they created the trust, they did not understand the funding requirement, or they never completed the funding requirement. If you have a Revocable Living Trust, ask yourself this question: Do I have assets titled in my individual name instead in the name of the trust? If you don’t know, simply look at the appraisal district records for any real property, the title on your bank or investment statements, and your vehicle titles. If any of these are listed in your individual name, you do not have a fully-funded trust. Unless this asset was specifically excluded for the trust, you may need to fund that trust.
For many asset classes, it does not require a lawyer to transfer the assets into the trust. That can be accomplished by a visit to the bank, a call to the broker, or a visit to the tax office to change vehicle titles. A lawyer would be required to draft an appropriate deed, transfer mineral interests, or update entity records to reflect the new ownership of an LLC, or a family corporation. If you find you have a partially funded or unfunded trust, please take the steps to fund the trust, or consult an attorney as to why these assets should or should not be in the trust.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
