Let me tell you about two of my clients: a couple in their late 70s, living in their own home in a lovely middle class neighborhood. They did all the right things-worked hard, paid their bills on time, saved, raised 3 loving children and even engaged an attorney to help with their estate plan. They had a will, durable power of attorney and a revocable trust. However, they failed to follow through and move the assets listed in trust to the trust. So, what’s the big deal?
Assets that are left through a living trust don’t have to go through probate. Probate is a court supervised process of paying debts and distributing property. Probate can add time to settling an estate, but more importantly, can eat away at the assets with court and attorney fees, leaving less for the heirs-in some cases up to 20% of the assets intended for heirs have been chewed up in the probate process.
A trust is a legal framework. It gives the trustee and the legal system guidance on how to care for someone, should they become incapacitated (Advanced Health Care Directive). It clearly delineates how to distribute an estate after death (Will) and it protects assets (home, bank accounts, investment accounts, etc.).
The trust document will contain a Schedule of Assets that lists all assets ruled by the trust. Certain assets cannot be put into trust, such as an IRA which specifies beneficiaries. But those assets that have been put in trust must literally be moved into that trust. Most attorneys will work with you to put real estate into the trust, but the rest is up to you.
Assets, such as Checking and Savings Accounts, CDs and Safe Deposit Boxes will need to be moved. This requires that the trustee bring the Certification of Trust document, prepared by the attorney, to the bank and request they change the name on all accounts listed in trust. Brokerage Accounts, if listed in a trust, must also be moved. This normally involves paperwork that should be provided by your broker.
Depending on the sophistication of your financial picture, there are many other kinds of assets (e.g. businesses, promissory notes, property insurance, etc.) that can be transferred into trust. Your attorney should give you specific instructions for moving all assets listed in trust.
The key here is to do your homework and move those assets. If you don’t move the assets, then the trust is nothing more than an empty shell and won’t provide the financial protection and security for which it was designed.