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If you are lucky enough to have accumulated real property, and investment and savings account, then you already know the value of having a trust along with other critical estate planning documents. A properly drafted trust will avoid the time and expense of probate, and prevent California from recovering any Medi-Cal benefits you may have collected during your lifetime. If you’ve taken the time and expense of creating your estate plan, this article is a reminder of the importance of maintaining it over time.
Most of the time trusts I review were well drafted and properly funded by transferring assets into the trust. The problems start when houses get sold and new ones purchased, investments are acquired and sold, inheritances received and invested, and bank accounts changed over time. I’ve seen many people become complacent after they complete their trust, forgetting to consider titling new or replacement assets in the name of the trust. Such inaction can lead to probate of some or all of the family assets, even though the family had created a perfectly good trust.
Trusts and trustees only protect assets held in the trust. Titled assets such as real estate, investment and bank accounts, business interests and savings bonds must all be titled in the name of the trustee of the trust. If not, they will often require a probate proceeding to determine who will inherit them when the owners pass away. Other examples of assets needing to go through probate have included savings bonds, life insurance policies or IRAs with predeceased beneficiaries.
Successor trustees often come to me for help in administering their parents’ trust. Once we list out the assets held by the parents, it’s pretty easy to determine what is titled in the trust and what is not. I am always surprised to see about a third of my probate cases are from families who had a trust but failed to keep it up to date.
My advice to clients is to periodically list everything out and start validating how title is held to each asset. Most titled assets issue statements from time to time, so look at the statements to see if the trust or the trustee is named on the mailing label and account statement. Bank and investment statements are easy, but other asset types need a little more investigation to determine how title is held. For real property, you can contact a title company or real estate agent to obtain a copy of title. It is also free to go to the county recorder’s office and look it up on their computer system. Other assets, such as life insurance policies, 401k plans and IRAs, use beneficiary designations to pass title to the asset once the owner has passed away. Make sure to check with each of these entities to review your primary and contingent beneficiary designations. It’s free to do and may save you family the time and expense of probating the asset if the beneficiary designation is incorrect.
Mark Breunig is an estate planning, elder law and probate attorney with offices in Lincoln and Loomis California. Email Mark at firstname.lastname@example.org.