A Revocable Living Trust is an estate planning tool used to avoid probate, maintain privacy and ensure a trustee's ability to access assets if the trust creator becomes incapacitated. However, creating a trust is just the first of several steps necessary to achieve the trust’s goals, reports a recent article, “Beautiful Documents, Broken Plans: When Estate Planning Falls Short,” from Cape Gazette.
For a trust to be funded, the accounts, real estate and other assets must be retitled. Funding a trust requires changing ownership of the assets from the individual, couple, or joint owners to the trust’s name. For instance, instead of “Jane and John Davidson,” the ownership should read “Jane and John Davidson, Trustees of the Davidson Family Trust.”
Assets to be retitled include bank accounts, investment accounts, vehicle titles, real estate deeds or titles, depending upon the jurisdiction. Assets with beneficiary designations can have a trust as the beneficiary. However, this should be reviewed with an estate planning attorney to ensure that it is the best option.
Some retirement accounts and pensions cannot be placed in a trust; read the fine print to learn if they require a human beneficiary.
Skipping this step has caused more than a few estate plans to fall short of their intended goals. Failing to complete the asset retitling is like owning a safe but keeping valuables on the kitchen counter. You may have a very sturdy safe. However, it won’t serve any purpose other than as a doorstop.
For a widow whose husband and financial advisor stubbornly resisted all requests by their estate planning attorney to have their accounts retitled, the result was a disaster. Upon her husband’s death, she learned $850,000 worth of assets were in her late husband’s individual name. They had never retitled the assets, so all the assets had to go through probate.
The widow, who had been discouraged from attending meetings with the financial advisor for decades, thought all the assets were owned jointly. She was stunned, but nothing could be done. She had to pay more than $10,000 in fees to the court and deal with months of paperwork and deadlines while in the early stages of the grieving process for her beloved husband.
There were several mistakes made by this couple, only one of which was the failure to retitle the assets.
Proper planning with a team of professionals, including an estate planning attorney, a financial advisor and a CPA, is the best means of ensuring that an estate plan will effectively protect the family. Both spouses should have been involved in the planning process, asking questions and requesting confirmation and documentation to ensure that all steps are followed.
If you have a trust and aren’t sure if it’s been funded, contact your estate planning attorney to learn what your next steps should be.
Legacy One Law Firm, APLC is an estate planning and probate administration law firm in Los Angeles, California, serving families throughout the State. Schedule a quick and easy consultation with our estate planning attorney, Sedric E. Collins, Esq., or call 323-900-5450.
