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Randall D. Armour: A living trust can make things easier

It's Your Money

Posted: May 6, 2009 8:38 p.m.
Updated: May 7, 2009 4:55 a.m.
 

One of the primary reasons people establish a revocable living trust is to avoid probate — the costly, time-consuming court procedure that would otherwise be necessary in most cases to transfer assets at death.

I have found many people mistakenly believe that if they have established a trust, probate automatically will be avoided for all of their assets. This is not the case. The trust will only avoid probate for those assets that are actually owned by the trust.

After the trust is set up, your assets must be transferred from you to your trust. Assets acquired after the trust is established must be properly titled in the name of the trust. We call this process of transferring assets “funding” the trust. If assets have not been transferred to the trust prior to your death, there is often no way to transfer those assets other than through probate. Even if you have a will that names the trust as the beneficiary of your estate, the will would have to be probated to transfer the assets into the trust.

The funding process is not difficult, but it does take some time. The attorney who drafts your trust should prepare the necessary documents to transfer California real estate to the trust, arrange for the transfer of out-of-state property, and, at the very least, provide detailed instructions for transferring all other assets.

Generally, all of your assets should be transferred to the trust, with the exception of tax-deferred retirement plans and other specific types of assets. Retirement plans may name the trust as a beneficiary, but you should first talk to a qualified advisor regarding the available options. Other assets, such as vehicles, may be left out of the trust and still avoid probate. It is extremely important that you prepare a complete list of assets you can review with your attorney to insure that the trust is being properly funded.

Personal property such as artwork, household furnishings, jewelry, sporting equipment and other household goods are usually transferred to the trust by a bill of sale or other document that assigns these items to your trust.

In California, assets may be transferred to the trust after your death if there is sufficient evidence of your intent that the assets belonged in the trust. Evidence of your intent may be found in the trust document itself, or on a schedule of assets attached to the trust that identifies an asset as part of the trust. The problem is that the assets you have when the trust is established may not be the same assets you own at the time of death. Therefore, there should be other documentation provided with your trust package to make it clear your intent is that all of your assets, with certain exceptions, belong to the trust.

Attorney Randall D. Armour practices in the areas of estate planning, probate and trust administration. You can contact the Law Offices of Randall D. Armour at (661) 259-0003 or visit www.armourlaw.com. His column expresses his own views and not necessarily those of The Signal.

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