Important next steps for the care and feeding of your revocable living trust.
If you have already created a trust, congratulations. You are better prepared for the inevitable than about 60% of all Americans, who have not created a will, much less a trust.
But unfortunately, you are not done yet. Your living trust comes with some homework. Don’t worry – it’s not that complicated.
1. Complete the funding of your trust
A trust that is not properly funded does not accomplish its intended purpose; protecting assets from probate. The deeds and funding letters most attorneys, myself included, prepare for most trusts are just a starting point in the funding process. You must follow through and make sure that your accounts are re-titled and your deeds are recorded. Otherwise, those assets are not protected from probate.
I recently had the unfortunate task of assisting a family who found signed and notarized, but unrecorded trust transfer deeds among the decedent’s papers. They are now undertaking the time and expense of filing a Heggstad Petition, to request the probate court to declare that the properties are actually part of the trust. This could have been easily avoided if the deeds had been mailed or taken to the recorder’s office after they were signed. Don’t let the same thing happen to your family.
2. Keep the trust documents safe but accessible
After the estate planning documents are signed, notarized, and witnessed as needed, the documents need to be kept not only securely, but accessible. The trust and related documents will not do you any good if the documents are not available to your successor trustee(s) and/or designated health care/financial agents when needed.
For a real-world example, I recently assisted the friends and family of a man who died alone in his home. He was discovered when a neighbor called the police for a welfare check. The coroner’s office came out and put a seal on his home. Under law, only a verifiable successor trustee or executor, or the next of kin is permitted to access the residence. The problem? The successor trustee did not have a copy of any of the documents, and the next of kin was a distant relative on the other side of the country.
This conundrum could have been avoided if the decedent had simply given a copy of the executed certificate of trust to the successor trustee. Every trust portfolio I create has an extra copy of the certificate of trust in the front inside pocket for this reason. After the document is signed and notarized, the trustors should make copies for their successor trustees. They should also consider doing the same with the powers of attorney for healthcare and financial matters.
3. Keep the trust up to date
This sounds like obvious advice, but many people overlook this need. Keeping the trust current is particularly important where real estate is concerned. Over and over again, I have seen cases where people have purchased new residences or rental properties years after they created a trust, but never funded the property into the trust. Another common scenario is someone who has transferred a property out of a trust in order to refinance it (which is commonly required by lenders), but neglected to transfer it back into the trust after refinancing was complete.
I have previously worked on several probate cases that have arisen from such situations, and recently took on a new example. Instead of less than $200 to have a deed created and recorded, the statutory probate fees on a $750,000 home add up to $36,000.
Do you have questions about your living trust? Contact Estate Planning Attorney Barbara Craig to schedule a free consultation. Serving clients in the South Bay area including San Pedro, Torrance, Lomita, Harbor City, Carson, Wilmington, Long Beach and other nearby communities.