What Assets Are in Your Trust?

Congratulations! You made it this far – you set up your Trust. But, are all your assets in the Trust?

Transferring assets into the name of your Trust is called “funding.” The estate planning attorney does his part – advising and drafting your Trust and other Estate Plan documents, maybe even including a Trust Transfer Deed to transfer real property (typically your home) into the name of the Trust.

The rest of the funding is up to you. You have to make the request at the bank or your brokerage to move your accounts into the name of the Trust. And, don’t forget to update beneficiary designations on your life insurance and retirement accounts.

Funding takes time and the temptation is to “do it later.” But, if the unthinkable happens before you get around to it, your estate may end up in Probate anyway, and it’s possible a beneficiary won’t receive the inheritance you intended.

Take the example of Jane, a single woman with two sons, both adults. Jane died recently with assets that included her home in Brentwood, an investment account with over two million dollars, and several accounts at Bank of America and First Citizens Bank that totaled about $500,000. And, because she helped one of her sons buy his house in Culver City, she is a co-owner as a joint tenant of that son’s home.

Jane created her Trust five years ago leaving everything in equal shares to her sons. Her son’s purchase of the Culver City house happened only a year ago, and she had not involved her estate planning attorney. If she had done so, her Trust would have been amended to leave extra money to the other son to equalize for the financial help Jane gave to her first son.

When Jane died, her Brentwood home and her investment account were in the name of the Trust, but all of the bank accounts were still in her individual name.

So, what will happen? In a few months, when Jane’s affairs are settled and the Brentwood home is sold, her sons will receive the proceeds from sale of the home and the investment account. Jane’s interest in her son’s Culver City house will transfer to the son as the surviving joint tenant.

The bank accounts will have to go through Probate and it will be close to a year before her sons receive that money. Jane spent $5,000 to create her Trust, which was intended to avoid Probate.

Now the Probate will end up costing her sons at least $15,000. And, there are some hard feelings between the sons that Jane helped one of them to buy his home, but not the other son. If only Jane had funded her bank accounts to the Trust and updated the provisions for her sons, her Trust would have worked as she intended.

Planning Ahead Column

By Lisa Alexander, Esq.

JAKLE, ALEXANDER & PATTON, LLP

310-395-6555