Managing Your Living Trust
Funding Your Trust: We often see articles written about living trusts and why they are a good idea. While this is true, because a living trust is the best way to avoid probate when you die, we also see many cases where people get a living trust but then fail to properly manage it. The first example of this is a failure to “fund the trust”. What do we mean by that? Well, it is possible to create a perfectly legal and valid living trust, sign it and then file it away. However, if you don’t transfer your assets into the trust, then you simply have an empty, unfunded trust. If that remains the case upon your death then your estate will likely have to be probated through the courts. We have clients come to us several times a year with this situation. If you have your trust properly prepared by a qualified legal professional, he or she will undoubtedly help you transfer your major assets into the trust. Real property and non-retirement accounts are the most common assets to be transferred into the trust.
When Things Change: Even if you properly funded your trust when it was created, we all know that things change. You might sell your house, or acquire a vacation property, or even inherit property. When that happens, it is important to remember to hold title in the name of the trust. Otherwise the asset sits outside the trust and, again, will likely require a probate process in order to transfer it to your heirs.
After the First Spouse Dies: Another oversight we find when meeting with estate planning clients is the failure to follow the instructions in the trust after the first spouse dies. It is very common that a living trust will require one or more sub-trusts to be created upon the death of the first spouse. These sub-trusts have their own rules for management of the assets while the surviving spouse continues living and perhaps even after his or her death. However, failure to follow the rules of the trust can have significant financial and tax impacts and could even expose the trustee (the surviving spouse or someone else) to liability if someone was harmed by the oversight. It is obviously a major event when a spouse dies and it would be prudent for the survivor to meet with his or her attorney to discuss the living trust and any other matters that may need attention.
Don’t Write On Your Trust Documents: We are surprised how often clients come to us and show us their existing trust documents that were prepared by us or someone else and we discover that they have written notes on them and/or crossed out the original printed text. This is a big no-no. The reason there is a formal signing when we create the living trust, with witnesses and notaries, is to comply with the law and to prove later that the client was the one who signed it, that they were of sound mind and memory, and they did so voluntarily. When one makes handwritten changes on the document later on, these lack the protections just mentioned and suspicions are raised as to who did it, whether they were mentally competent, or if it was done under threat or duress. This can lead to a legal challenge and a court will have to decide how to interpret the documents. Therefore, any time you need to make a change to your trust or any estate planning documents, we highly recommend you meet with a legal professional and have it done properly.
If you have any questions on the above or any other legal matter, please contact us.
Attorney at Law
About Anthem Law
Business – Family Law – Wills/Trusts – Probate – Personal Injury – Bankruptcy
The information provided is intended to give general information only and not to provide advice on specific legal issues. If you need our assistance interpreting any information, please feel free to contact us.