I recently met with a client who had an existing revocable trust, who asked me to review the trust and to explain the dispositive provisions (what exactly would happen when he died). After reviewing the trust with him, I asked what assets he had titled in the trust. The client looked perplexed and said “What do you mean?”
I explained that to maximize the probate avoidance benefits that a revocable trust provides, it is imperative that the trust be funded with assets. In other words, the grantor of the trust should retitle certain types personal assets into the name of the trustee of the trust as soon as the trust is created. It may be advantageous to name the trustee of the trust as the designated beneficiary of other types of assets.
I reviewed a list of the client’s assets and advised him which assets should be retitled at this time and which should pass via beneficiary designation.
This important, but often overlooked, step is critical to avoid probate, which is one of the primary reasons to create a trust (other reasons include estate tax planning, incapacity planning, asset protection, and spendthrift protection).
By funding the trust now, thousands of dollars in probate fees and costs will be avoided in the future.
