Guest Post By T. Troy McNemar, Attorney, McNemar Law Offices, P.C.
Properly Fund and Review Your Revocable Living Trust
A revocable living trust agreement is a terrific mechanism for estate planning. But, in general, your assets must be titled in the trust’s name (referred to as “funding”) to avoid probate upon your death. Typically this is accomplished by changing the ownership to something like “John Doe, as Trustee of the John Doe Trust.” Your estate planner should have provided you with the appropriate language for titling when you created your revocable living trust agreement.
The reasons that assets are not funded vary. Many people never get around to funding their assets into their trust. Sometimes assets are removed from the trust (while refinancing a home, for example) and are never returned to the trust. Often people acquire new assets after setting up their trust and simply forget to title the new asset in the trust’s name.
The rule that your assets should be titled in the name of your trust has exceptions. If a beneficiary other than your probate estate is named for the asset (such as the beneficiary designation on an IRA account or life insurance policy), the asset will avoid probate without needing to be funded to your trust. Other assets, such as IRAs and some annuities, may lose a portion of their tax benefit if they are transferred to a trust. If you have questions about whether an asset should be funded to your trust or not, contact your estate planner.
As a practical tip, consider setting aside one day a year — perhaps the anniversary of the date that the trust was signed — to review whether your assets are titled in the trust and whether the trust still reflects your estate planning objectives.
T. Troy McNemar is a certified specialist in estates and trusts law. He has more than 19 years experience representing clients with estate planning, probate, adult guardianships and conservatorships, and general business matters.