Why Your Living Trust May Not Work When Your Family Needs It
Your living trust may not work just when your family needs - if it was never properly funded. That means your family could still end up in probate in order to deal with your assets, which means additional time, expense, and delay for them.
One of the primary reasons for choosing a revocable living trust over a will is to save your family from having to go through the Minnesota probate process in order to deal with your assets after your passing. However, in order for your trust to function as intended, you have to actually transfer your assets into it. The process of transferring your assets into your trust is known as funding.
As discussed in a previous article, a revocable living trust is a treasure chest for your family. However, in order for your treasure chest to work, you need to take the time to transfer your assets into it. In addition, any assets you acquire after you initially set up your trust must also be carefully added to the trust.
Far too often, I meet with clients who set up a revocable living trust but their previous attorney either never told them that they needed to transfer their assets into the trust, or did tell them and the clients never did it, did not know how, or transferred some but not all of their assets.
For example, I recently met with a gentleman whose sister had passed away. Her previous attorney had prepared a trust for her. However, at some point, a checking account was opened but never properly placed in the trust. Despite the fact that all of her other assets were accounted for, the family had to open a probate proceeding just to deal with the checking account.
I had some other clients who came in and asked me to review a trust that was prepared for them by another attorney a number of years ago. The attorney never mentioned that they needed to put their assets into their trust in order for it to work. Not only that, but the attorney did not prepare a pour-over will for them. Not creating a pour-over will was a problematic oversight because, even though the estate would still have to go through probate because it was not funded, with a pour-over will at least their assets would be funneled into their trust with their trustee acting as the personal representative so that their estate, and their assets, would be handled as they intended. Instead, their family would not only need to go through the probate process, a judge would now decide who the personal representative was and who the beneficiaries would be of their assets.
For all intents and purposes, they would pass away without an estate plan. Yes, you read that right. In general, judges handle assets outside of a trust as if no will or trust existed. They generally do not look to the trust to determine what should happen to any assets outside of the trust.
That is why when we prepare a trust for you, we give you written instructions and a funding toolkit to help you transfer your assets into your trust and provide guidance to you throughout the process. The toolkit can also be used to make sure any additional assets you acquire are properly placed into your trust. If requested, we can also handle all of the funding for you.
If you're considering creating a will, establishing a trust, or looking into any other estate planning services, contact Maple Grove attorney Chuck Roulet at (763) 420-5087.