Many folks create living trusts to, among other reasons, avoid the high costs of a California probate proceeding. Regrettably, some may think they’re saving money even more with do-it-yourself kits, Internet trusts, or by working with a paralegal or a general practitioner. If you go those routes, you increase your chances that your living trust may not avoid probate. Even with a high quality trust, failing to follow through with the “funding” process could trigger a probate.
Why Won’t my Living Trust Allow Me To Avoid Probate?
Good question. We get this question all of the time and are happy to answer. Yes, a well drafted living trust is designed to avoid probate. However, the trust only controls assets titled in the name of the trust (or made payable to the trust upon death such as life insurance, annuities and retirement plans.)
If you own any significant asset in your individual name, the chance of a probate or other expensive court-based proceeding greatly increases.
If you own any asset in joint tenancy (with rights of survivorship), the asset will avoid probate on the death of the first person to die, but not the last. Upon the death of the surviving owner, probate will likely be required.
You Must Fund Your Trust
With our clients, we always emphasize the importance of funding their living trust. You cannot stop once you sign the documents and pick up your estate plan from our office.
At the risk of sounding like a broken record: You must fund your trust.
This means that you must retitle the title of all of your assets into the name of the trust (and make the trust the beneficiary of your retirement plans, life insurance, and annuities.) While this may sound simple, there are a number of considerations to take into account in handling this critical aspect. Well drafted living trusts, which you will not find from cut-rate trust sources, contain special provisions for the handling of, among other things, retirement accounts and life insurance.
Funding problems are just one of the many defects that we have observed in bargain basement trusts which foolhardy bargain hunters unfortunately fall prey.
If you have questions about funding your trust, contact us. Your estate plan and avoiding probate depends upon accurate funding.
- Joint Tenancy: Watch Out for the Perils – Part 2 of 2 - December 7, 2022
- Joint Tenancy: Watch Out for the Perils – Part 1 of 2 - December 5, 2022
- Getting Started in Estate Planning – The First Meeting with Your Attorney - December 3, 2022