If you’ve established a revocable living trust, it’s likely that your estate planning attorney has let you know that it’s important to keep your trust properly funded. This means that, beyond simply creating the trust, you need to make sure all the appropriate property is transferred into the name of the trustee. Many people make the mistake of setting up a trust with the hopes of avoiding probate, only to leave the trust unfunded or merely partially funded. This is a problem, because a revocable living trust can only help you avoid probate if the property you want to transfer is actually owned by the trust. Any property that is left out of your trust when you pass away will be transferred in one of three ways:
· Joint Tenancy: Property co-owned by you and another person as Joint Tenants With Rights of Survivorship will pass directly to your surviving co-owner, without the need for probate.
· Beneficiary Designations: If you own property for which you’ve designated a beneficiary, such as a life insurance policy or a retirement account, that property will go directly to the named beneficiary – again, without the need for probate.
· Probate: Property that is titled solely in your individual name at the time of your death will have to go through probate before it can be transferred to your heirs or beneficiaries. The probate process can take one of a few forms. For example, if you have a pour-over will in addition to your trust, then any individually-owned property left out of your trust will be picked up by your will and, through the probate process, will be “poured over" into your trust, ultimately being distributed to the beneficiaries named in your trust. On the other hand, if you pass away without a will, then property owned solely by you will pass to your heirs as determined by state law, but as a result of a probate.
Your estate planning attorney can help you determine which property needs to be funded into your trust, and can help you make a pour-over will to act in conjunction with your trust.
If you have or are interested in a revocable living trust, then we at the Mendel Law Firm can help you uncover your options and choose the strategy that is best for you.