Most people realize that setting up a revocable trust as part of their estate plan is a smart thing to do in order for their family to avoid the probate process. However, it’s not enough to just set up the trust. It needs maintenance over time.
Below are some of the most common reasons why I have seen families end up in Probate Court while administering a trust after the death of a loved one:
1. The trust was not properly funded when initially set up. What this means is that the assets were not correctly retitled to the name of the trust. Listing assets on the trust assets schedule is not enough. Title controls. Some common assets that revocable trusts typically own are real estate, brokerage accounts, sometimes bank accounts and business interests.
2. The assets were acquired in the individual’s name after the trust was created and the assets were not retitled to the name of the trust. We commonly see this happen when somebody makes a new purchase of real estate, opens a new bank or brokerage account or inherits assets.
3. The person who set up a trust refinances their primary residence or other real estate and the property gets removed from their trust at the loan closing. Then after the loan closing, the property doesn’t get retitled to the trust and then they later die with the property in their individual name.
4. An asset that did not need to be retitled to the name of the trust (such as a retirement account), did not have a completed beneficiary designation form or the beneficiary on the beneficiary designation form has predeceased the owner of the retirement account.
In California, the threshold to trigger a Probate action is an aggregate of $166,250 including all assets outside of trust title and with no beneficiary designation form attached to the asset.
Due to the complexities of funding, we routinely advise clients to be in touch with us at least every 3 to 5 years to do a review of their plan to ensure that their trust works as designed. Over time, other changes in the law, both state and federal, can also affect the validity of an estate plan in addition to proper trust funding.If it has been quite some time since you last reviewed your estate plan and would like to come in and meet with one of our attorneys to discuss it, please contact Kirsten, our firm's Intake Director, at 760-448-2220.