So, you are responsible, have some property, maybe have a family, and have spent a few thousand dollars of your hard-earned money on developing a revocable trust-based estate plan. Good for you! But did you or your attorney fund your trust?
Funding the trust is really just the process of changing title to property so that the title reflects the existence of the trust. Meaning, it moves the property from you, individually, into and recognizing the existence of the trust.
Funding your trust is one of the most important last steps in developing a trust-based estate plan. Why? Well, there are many reasons why, but this article will focus on the fact that moving property into your newly established trust-based estate plan will ensure that the trust is legally valid and will assist, upon your death, with avoiding probate. Here are the reasons why for the purpose of this article.
The documents that your attorney drafted for your trust are just documents. Nothing more and nothing less. Under California law, your trust does not technically legally exist and is not legally operative unless the trust has property in it. That is the reason why you or your attorney must “fund the trust” or move property into the trust in order to make the trust legally significant. So, once you have created a trust by the preparation of the trust documents, fund the trust by transferring your property to the trustee of the trust. Seems simple enough but it can be complicated.
The property you move into the trust or use to fund your trust can be either real property or personal property. Different types of property require different steps for funding the trust with it. Because of this, it is highly advisable to have your attorney assist you with this process of funding the trust. Mistakes can happen and if you attempt to fund the trust on your own and make a mistake, you may end up with an unfunded trust when you think it is funded.
Many times an attorney will also write a “pour-over” will when your revocable trust-based estate plan is developed. This type of will is an important document for most people who create such an estate plan. When a revocable trust is funded during your lifetime by a transfer of property, real or personal property, a pour-over will can be used to transfer later-acquired property to the trust upon your death. The pour-over will acts as a safety net to transfer property acquired after you developed your trust-based estate plan that, for some reason or another, was never transferred into your trust. This is true even if the after-acquired property is significantly valued property or minor valued property. But note that significantly valued property left outside of the trust may be subject to probate upon your death in order to move the property into the trust. Probate is expensive and time consuming. As a best practice, if you have a trust-based estate plan and you have acquired other significantly valued real or personal property since your created the trust, have an attorney review the after-acquired property values and your trust to determine if that property should also be placed into the trust during your life.
So, if a pour-over will is used in conjunction with trust, then you need not worry about funding every minor valued piece of property into the trust because such property will be covered by the pour-over provisions of the will and operates to move that minor valued property into the trust upon your death. However and as implied above, this is only for minor valued property. If the value of property not transferred to the trust does not exceed $150,000, the trustee of your trust, upon your death, may be able to collect the property and quickly move the property into the trust without a costly and time consuming probate of your estate.
Anyone facing the above issues should contact the Chilina Law Firm or another California attorney who focuses on estate planning, trust administration, or probate for more information about their trust, their property, and what is required to ensure that their estate plan is properly funded and legally significant.
Authored by Greg Chilina and Co-Authored by Karen Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email at info@chilinalaw.com or visit the Chilina Law Firm at www.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
Attorney Advertising: The content of this blog/article is merely to provide general information on a topic of law and should not be construed as legal advice or the formation of a client-lawyer relationship. A client-lawyer relationship with the Chilina Law Firm will be created only through a written agreement signed by all parties. Anyone reading this blog/article should not rely on the information provided alone and should seek independent counsel regarding your specific situation.