If you have created a living trust, you have already taken steps to avoid the probate process. The concept of the living trust is to re-title all of a person’s assets into the name of their trust so that when they die they are not holding any assets into their sole name and therefore there is no probate. But, beware. A living trust is just what it says – a living document. If you have a living trust you must make sure you have (1) placed all your assets into the name of your trust; and (2) kept your trust and beneficiary designations up to date.
1. Placing your assets into your living trust.
So many times clients have come to see me proudly holding their binders for their living trusts. Upon review, I have found that the client’s assets are not in the trust and, without that, the assets must go through the probate process to get to their loved ones.
Unfortunately, many people who have living trusts die without realizing this – which is something their living trusts are intended to prevent.
For example, you must re-title your house into the name of your living trust through filing a new deed to the house. The house will not technically be moved into the trust by simply saying so in the trust document. The same holds true for your other assets. Each asset is different, but the approach must be the same – fill out al required forms to technically re-title the asset.
How does it happen that some clients have no assets in their trusts? Some attorneys that create living trusts require that their clients take all the steps necessary to re-title the assets into the name of the trust. I recommend you do not obtain a living trust without assurances that the attorney will prepare all transfers of your assets into the trust. This is not something you should try to do yourself.
First, life often intervenes in plans and clients do not have the time or knowledge to figure out how to re-title their assets. Second, moving assets can be complicated with various forms to fill out that are confusing. The clients should not have to do work to fund their trusts. They attorneys should do that work for you. The practical effect of having the client do the work to fund the trust is that clients do not always get it done.
Don’t let this be your reality. If you already have a living trust, make sure all your assets have been re-titled into the name of your living trust. And, don’t forget. If you acquire a new property, acquire it in the name of the trust so that you do not need to file a separate deed to re-title it. Most attorneys will provide you with an affidavit of trust to enable you to provide a document to the title company so that they can title the property in the name of your trust.
2. Keep Your Living Trust Up to Date
In our practice, we meet with clients every three years to update their trusts. Why? We want to make sure that the clients have not purchased an asset (like a house, for example) in their sole name. If they have, we will take steps to prepare a deed to transfer the house into the name of their trust.
Often, clients’ wishes will also change over time. Clients that have named certain beneficiaries for their estates may wish to change the names. Beneficiaries may die and precipitate a change. Investments and brokers may change. Retirement funds may change, etc. Whatever it is, you must keep on top of the changes in your life by including them in your living trust package. If you don’t, there may be terrible consequences.
For example, one married couple prepared a living trust and the wife died leaving her share to the husband. The husband remarried, but the trust was never changed to reflect this. On the death of the husband, part of the estate went to the relatives of the first wife.
It isn’t difficult to amend a trust to make changes, but you just have to be certain it gets done. The concept of a living trust is to avoid the hassles of the probate process and create a very easy transition for loved ones when you die. But the transition is only going to be an easy one is the trust is up to date. If you have not reviewed your living trust in more than three years, do it now.
About the Author: Lyn Striegel is an attorney in private practice in Chesapeake Beach and Annapolis. Lyn has over 30 years experience in the fields of estate and financial planning and is the author of “Live Secure: Estate and Financial Planning for Women and the Men Who Love Them (2011 ed.).” Nothing in this article constitutes specific legal or financial advice and readers are advised to consult their own counsel.