For many, a Revocable Living Trust is a wonderful substitute for a Will to do estate planning. There are many advantages, and a few disadvantages, to a living Trust, so we do not make a blanket recommendation that everyone have a Revocable Living Trust. However, it is not uncommon that we are approached by someone who has a Living Trust drafted and prepared by another attorney and they wonder if it is still good for them. By far, the most common problem we find is that the Trust is not funded. An unfunded Trust is essentially no Trust at all.
In short, the concept of a Revocable Living Trust is that it is like an entity that holds your assets, and the rules of the Trust determines what happens to your assets when you are incapacitated or die. Therefore, the Trust controls all of the assets in the Trust without probate or guardianship proceedings being needed. For the Trust’s rules to apply, the person’s assets need to be in the Trust. A Trust cannot control assets that are not placed into the Trust by the Trust maker.
So, what we commonly see is that a person has a perfectly well-drafted Trust, but for some reason, their property was never transferred into the Trust. Their home or other real estate was not deeded into the Trust. Their bank and investment accounts are still in their individual names. Funds paid to them, such as mineral royalties, are paid to them individually. To be successful at avoiding probate or guardianship, the Trust needs to be fully funded. All of the Trust maker’s assets (except tax-deferred accounts – IRAs and 401ks) need to be transferred to the Trust, so the Trust rules control.
If you have a Revocable Living Trust, you need to review all of your assets to make sure they are funded into the Trust. If you are unsure, we can help you. Preparing deeds and giving instructions on how to properly fund a Trust is not expensive legal work, and we want to see that you have a Trust that works as intended. We want you to have a successful estate, not just documents on your shelf.
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.
