Review your Living Trust to Avoid Probate

There are many types of trusts, and the revocable living trust is the most common. It is created when the grantors transfer assets to the trust and trustee with the intent that these assets be held for named beneficiaries. Normally during the lifetime of the grantors, they are also the trustees and beneficiaries of the trust.

Revocable living trusts can be amended or terminated at any time during the grantors’ lives, but when the grantors become disabled or pass away, a successor trustee becomes responsible for managing the trust assets. Normally when the grantors die, the trust directs the trustee to distribute the trust estate in the same manner as they would in a will. If properly created and funded a revocable living trust will avoid the estate having to go through the probate process, saving it time and money.

Revocable living trusts may be structured in many ways, but to work as planned to avoid probate the grantors’ assets must be transferred to the trust during the grantors’ lifetime or “automatically” upon their deaths. Any assets that are not owned by the trust upon their deaths become part of their estate.

Often “pourover” wills are created with a revocable trust to make sure that any assets that do not get transferred to the trust will go to the right beneficiaries. However, if a pourover will has to be used then the estate ends up going through the probate process anyway, defeating one of its primary purposes.

Therefore, the grantors must make sure that the trust is properly “funded.”  When a revocable living trust is executed, a schedule of assets is included or attached to the trust. While the schedule is effective for personal property, Tennessee law provides that titled property such as real estate, stocks, bonds, bank and brokerage accounts must be transferred to the trust by recording a deed (for real property) or through registration of the asset in the name of the trust or trustee. A schedule of assets will not work for these types of properties.

A living trust can be a good estate planning tool, but it is important to make sure that the assets make it into the trust. If you or someone in your family has created a living trust, review it periodically to make sure it is properly and completely funded.

If you would like to create a living trust or just have questions, please contact us.