Last week a client came in and asked me to review her “Estate Planning Portfolio” which had been drafted by another attorney a few years ago. The client was proud that she had a Revocable Living Trust in her portfolio because a similar trust had made the transfer of her deceased sister’s assets fairly simple and quick. The portfolio also included a “Pour Over Will”, a Health Care Proxy and a Power of Attorney. After reviewing the trust documents and the schedule of assets included in the trust it became apparent that the trust had never been funded. My client believed that her two homes and her other assets were in the trust. They weren’t. If my client had passed away before the lack of funding was discovered and rectified, all of her assets including homes in two different states would have to pass through her Will before they would be “poured over” into her trust and reach her designated beneficiaries. Her estate would have to commence probate proceedings in each state where a home was located. The speed and ease of asset transfers and cost savings that a trust can offer thus would be lost.
Revocable Living Trusts are an excellent part of an Estate Plan. It is important that they are funded when they are set up. It is also important that assets acquired after the Trust is set up are moved into the Trust. In a properly funded Revocable Living Trust the “Pour Over Will” may never need to be probated because all of the estate’s assets have already been transferred to the Trust.
When hiring an attorney to create a Revocable Living Trust, inquire if the attorney will be involved in transferring your assets into the Trust. If the attorney is not going to be involved in the transfer of assets, find out if the attorney will provide instructions on how to do it. Also find out if the attorney will check that the assets have been properly transferred, if the transfers are done by someone else. Otherwise, you may be simply buying a more expensive and prolonged Will based estate plan masquerading as a Trust based estate plan.