Estate Planning, Family and Wealth Planning, Legacy Planning

How to Avoid Sending Your Loved Ones (and Assets) through Probate

Today many people are using a revocable living trust instead of a will or joint ownership as the foundation of their estate plan. When properly prepared, a living trust will avoid the public, costly and time-consuming court processes guardianship (due to incapacity) or probate (after death). However, just having a Living Trust drafted is not enough. A big and very common mistake people make that send their assets and loved ones right into the court system anyways is the failure to fund their Trust.

What Does It Mean to Fund Your Trust?

Funding a trust is simply the process of transferring assets from your name into your Trust.  Usually beneficiary designations are also changed to the Trust so that the trust receives those assets and the assets are distributed as per the terms of the Trust.

Funding is accomplished in several different ways:

  • Changing the title of the asset from your individual name (or joint names if you’re married) to the name of your trust – for example, from John Smith to John Smith, Trustee of the John Smith Living Trust dated December 1, 2015.
  • Assigning your interest in an asset without a title (such as artwork, jewelry, collectibles or antiques) to your trust.
  • Changing the primary or contingent beneficiary of assets, such as bank accounts, retirement or investment accounts, to your trust.

What Happens to Assets Left Out of Your Trust?

One of the many reasons for having a Trust in the first place is to avoid the need of going through a Guardianship or through Probate. Unfortunately, it may feel that once the Trust is signed, the work is complete; but this is not true. Once the trust is signed, funding must take place. Funding is as important as having the Trust drafted in the first place. If you fail to take the next step to change title and beneficiary designations to the name of the Trust, then the Trust is not going to achieve the goals you wanted and in the event of incapacity, you are going to need a Guardianship and a Probate if you die. Thus, it is extremely important that your trust is properly funded.

Which Assets Should, and Should Not, Be Funded into Your Trust?

In general, you will probably want to fund the following assets into your trust:

  • Real estate – homes, rental properties, vacant land and timeshares
  • Bank and credit union accounts – checking, savings, CDs
  • Safe deposit boxes
  • Investment accounts – brokerage, agency, custody
  • Notes payable to you
  • Life insurance – if you don’t have an irrevocable life insurance trust
  • Business interests
  • Intellectual property
  • Oil and gas interests
  • Personal effects – artwork, jewelry, collectibles, antiques

On the other hand, you will probably not want to fund the following assets into your trust:

  • IRAs and other tax-deferred retirement accounts – only the beneficiary should be changed
  • Incentive stock options and Section 1244 stock
  • Interests in professional corporations
  • Foreign assets – in some countries funding an asset into a U.S.-based trust causes adverse tax consequences, while in other countries trusts aren’t recognized or are ignored due to forced heirship laws
  • UTMA and UGMA accounts – your minor grandchild is the owner, not you as the custodian; instead, name a successor custodian
  • Cars, trucks boats, motorcycles and scooters –most states allow a small amount of assets, including vehicles, to pass outside of probate, in others a beneficiary can be designated for vehicles, and in others, vehicles don’t have to go through probate at all

It’s important to work closely with your attorney to determine what should go into your trust and what should stay out.  Remember that improperly funded assets may end up through a guardianship or probate action in Court.

Many people like the cost and time savings, plus the added control over assets a living trust offers. Yet in the end a unfunded trust isn’t worth the paper it’s written on. Make sure that if you already have a trust, that it is fully funded. If you are in the process of creating a trust, make sure that it is property funded. We are available to answer your questions about funding your trust and look forward to working with you and your advisors on all of your estate planning needs.

Give us a call at 305-456-7158 and we will schedule an Estate Planning Session for you or you can click Estate Planning Session to request that we call you to schedule. Either way, do not wait, be protected and  have peace of mind knowing you have the right estate plan.

Yahima Suarez, Esq.
Yahima Suarez, PA


Family and Wealth Planning, Testamentos y Herencias

Nosey Neighbor Nellie Can Find Out About Your Probate. Really!

Most people think of probate as a private process. However, since Wills are filed at the courthouse, probated estates become a matter of public record. That means your nosey neighbor Nellie can simply go down to the courthouse or hop online and find out about your probate and know exactly what’s in it, who will receive and how much!

It’s Not Just Nellie That Has Access…

After a death, most states require that whoever has possession of the deceased person’s will must file it with the probate court – even if there is not going to be any probate court proceedings.  While Nellie may be an annoyance and have no other reason to view the information other than curiosity, others can get access to your public records and make your beneficiaries’ lives miserable, such as:

  • Financial predators. While today’s digital world is convenient, it’s also dangerous. Financial predators find ways to access information online. Since courts are part of a bureaucratic process that often moves slower than a glacier, months can elapse before you (or the court) realizes that your beneficiaries have been tricked.
  • Even the most well-meaning charities can become an annoyance when money is considered “up for grabs.” This is especially true in an estate situation when those inheriting assets want to do the right thing and honor their loved one.
  • Will challengers. Public record documents such as probate provide those with an interest (whether valid or invalid) to challenge the will. This can equate to added costs and time defending the will.

Avoid the “Nosey Nellie” Factor with A Trust

Trusts are never filed with a court, either before or after your death. Probate courts are not involved in supervising your trust administration. So, you can avoid busy bodies and predators by creating a trust. Did you hear that, Nellie?