ESTATE PLANNING
TRUST
In order to simplify things, a trust is a legal arrangement whereby one person usually referred to as the settlor, or grantor, gives property to another person or entity known as the trustee, who agrees to manage that property for the benefit of whomever the settlor chooses.
In the standard revocable trust, the initial trustee is also usually the settlor who manages the property for his or her own benefit during lifetime. Upon death, a successor trustee that has been named in the trust, takes over management of the trust property and depending on the desired results and the terms of the trust, either distributes the property outright to beneficiaries, or continues to manage the property for the benefit of the beneficiaries (this is often the case if the beneficiaries are minors where a continuing trust for the children is established within the trust).
If you want to learn more about trusts I have seen a number of clients come through the office over the past few months who, usually in the process of trying to sell an inherited home, that either through oversight, or lack of information given to them by the attorneys who assisted them with their estate planning documents, failed to fund their revocable trusts properly. In the majority of these cases, the asset they consistently failed to place in the name of the trust, real estate, was not properly placed into the trust. When these individuals then attempted to sell the property, the title commitment came back and it became evident, that either formal or summary administration in a probate proceeding would be required in order to sell and convey title to the property. Interestingly, upon review of the wills in many of these cases, contained standard pour-over-provisions, wherein the residuary clauses of the wills devised the assets to a revocable trust which had been created by the clients. Unfortunately, the efforts these clients had made and the funds they had expended in trying to ensure that their heirs could avoid costly probate and timely probate proceeding upon their death were all in vain because they had failed to properly convey title to the real estate to the trustees of the revocable trust they had established.
Fatal Trust Mistakes It is pointless, to establish a revocable trust and not place the assets you would like to pass according to the terms of the trust, into the trust. Fatal Trust Mistakes It is pointless, to establish a revocable trust and not place the assets you would like to pass according to the terms of the trust, into the trust. This principle pertains to bank accounts, brokerage accounts, real and other tangible and intangible assets. If the primary objective, is, as it is in most cases, to use a revocable trust as a probate-avoidance mechanism, failing to convey or assign assets to the trustee of the trust as required, is a fatal mistake. Consult an Attorney It is possible that many of these people had used self-help forms purchased online and did not comprehend how all the pieces (in this case the estate planning documents) all fit together. Thus, while it is easy to do the forms online and may cost less, estate planning is a complex process and it is better to consult with an attorney who can look at all your assets, come up with a plan that makes sense, and then have you take the steps necessary to execute the plan. I always try to formulate the simplest, most cost-effective estate plan for clients based on you and your intended beneficiaries’ circumstances.