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TRANSFERRING ASSETS INTO A LIVING TRUST

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CHANGING OWNERSHIP TO THE TRUST

When you transfer assets into a living trust you are changing legal ownership of your assets from your name to that of the trust. Most people create a living trust with themselves as trustee, so you will still be able to use and control your assets, but they will technically be owned by the trust. When funding a living trust, ownership will be transferred from you to (Your Name), Trustee of the (Your Name) Living Trust. Note that items in the trust will continue to use your Social Security number. Make a complete list of the assets you want to transfer so that you are sure you don’t leave anything out.

TRANSFERRING REAL PROPERTY TO YOUR TRUST

One of the largest assets most people own is their home and this is likely an asset you want to be sure to transfer into your trust. You can transfer your home (or any real property) to the trust with a deed transfer, a document that transfers ownership to the trust. A quitclaim deed is the simplest method, however a warranty deed may be preferred, since it ensures you have good title when you transfer it and makes it easier for your trust beneficiaries to sell at a later time. You will want to check with an attorney about which type of deed is best in your situation. Once the deed is prepared, a real estate deed transfer must be filed with your county and you will likely need to pay a filing fee.

A deed transfer should not affect your mortgage, even if you have a due on sale provision. You should check with your title insurance (if you have any). You may be able to simply transfer it to the trust, or your title insurance company may require that the trust buy a new policy. Once the deed is transferred, you will need to change your homeowner’s insurance to indicate the trust as owner of the property. If you receive a real estate tax exemption, you will want to make sure that is transferred and you may need to show documentation of the trust to the taxing authority, such as a certificate of trust (a document your attorney can create that certifies the existence of the trust).

DRIVE THE CHANGES HOME

If you would like to transfer ownership of your car or truck to your trust, you need to first determine if your state will allow a trust to hold ownership of a vehicle (check the DMV web site or consult your attorney). You also should call your insurance company to be certain they will continue coverage once the transfer is made. To transfer ownership, you will need to obtain a title change form from your DMV and complete it, naming the trustee (as trustee of your trust) as new owner. Sales tax should not apply to the transfer. If the clerk tries to apply it, you may need to speak to a supervisor. Note that owning a vehicle in the name of a trust can be detrimental if you are in an accident. The other person may assume you are wealthy if they realize your car is owned by a trust and sue. If you own a boat, you will need to follow a similar procedure to transfer title.

BIG FINANCE

To transfer assets such as investments, bank accounts, or stock to your living trust, you will need to contact the institution and complete a form. You will likely need to provide a certificate of trust as well. You may want to keep your personal checking and savings account out of the trust for ease of use.

OTHER PERSONAL PROPERTY

You likely own many things that you don’t have actual written titles or ownership documents for, such as jewelry, furniture, collectibles, and the miscellaneous things that fill your home. To place them in your living trust fund, you can name them in your trust document on a property schedule (basically a list you attach to the trust document that is referred to in the document) and indicate that their ownership is being transferred to the trust. If any of these items are insured, be sure to transfer the insurance to the name of the trust.

ITEMS NOT TO BE TRUSTED

There are some things that cannot or should not be placed in your trust. Individual Retirement Accounts (IRAs) cannot be owned by a trust, so these must remain in your own name. In some states life insurance policies cannot be owned by a trust, and if it is allowed it generally is not advisable since it may make the benefits taxable.

COVERING ALL YOUR BASES

If you purchase or inherit items after you create the trust, you will need to transfer those items to the trust as soon as possible. If possible, when you purchase items, purchase them as trustee of the trust so they are automatically placed in the trust. To further protect yourself, you will want a pour over will. This last will and testament can be prepared by your attorney and will indicate that any items left in your name are transferred to the trust upon your death, so that your trust will be complete and provide all the benefits you intended.

Double check your list of assets to be certain you have moved them all to your trust. Ensuring that your living trust is properly funded will provide you with the protection you seek as well as the peace of mind that your affairs are in order.

WFB LEGAL CONSULTING, INC.–LAWYER for BUSINESS

A BEST ASSET Protection Services Group

DISTINCTIONS BETWEEN TRUST AMENDMENTS AND RESTATEMENTS

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A Trust Amendment is a legal document that changes specific provisions of a Revocable Living Trust but leaves all of the other provisions unchanged, while an Amendment and Restatement of Trust completely replaces and supersedes all of the provisions of the original Revocable Living Trust.

Understanding the Basics of Revocable Living Trusts

Before discussing when Trust Amendments or full Amendments and Restatements are required, you’ll need to understand what a Revocable Living Trust is – a legal contract between the Trust maker and Trustee that can be changed at any time and requires the Trustee to oversee the management of property transferred into the trust by the Trust maker for the benefit of the Beneficiary of the trust.

The key to a Revocable Living Trust is the fact that it’s revocable – meaning that at any time while the Trust maker is alive and competent the Trust maker can change, modify, update, or completely revoke the provisions of the trust agreement. Since this is the case, the name of the legal document that’s required to change, modify, or update the trust agreement is called a Trust Amendment and the legal document that’s required to revoke the trust agreement is called a Trust Revocation.

Contrast a Trust Amendment with a Trust Amendment and Restatement, which is a type of trust amendment that completely supersedes the terms of the original trust agreement. The name and date of your trust will stay the same (for more on this, see below), but each and every provision of the original agreement will be replaced by the terms of the restatement.

When Are Trust Amendments vs. Restatements Required?

While there aren’t really any written rules as to when an Amendment instead of a full Amendment and Restatement is required, the general rule is that if the changes that the Trust maker wants to make are minimal – adding or deleting specific bequests, changing who will serve as Successor Trustee, updating a beneficiary’s or Successor Trustee’s legal name due to marriage or divorce – then a simple Trust Amendment will cover these types of changes.

On the other hand, if the changes that the Trust maker wants to make are significant – adding a new spouse as a beneficiary, completely cutting out a beneficiary, changing from distributions to family members to distributions to charity or vice versa – then a complete Amendment and Restatement should be considered.

What if you’ve made a series of three or four simple Trust Amendments over the past 10-15 years and you want to make another change? Then consider consolidating all of your changes into a complete Amendment and Restatement – this will prove to be helpful to your Successor Trustee who will have a single document to follow instead of piecing together the provisions of four or five separate documents.

The Legalities of Trust Amendments

If you’re considering making a change to your Revocable Living Trust, don’t simply mark up your trust agreement and stick it back in the drawer. Why? Because a Trust Amendment must be signed with the same formalities as the original trust agreement, so your handwritten changes will, depending on applicable state law, either void the trust agreement or be ignored. Instead, ask your estate planning attorney to prepare the Trust Amendment for you so that it will be legally valid and binding on all of your beneficiaries.

Will the Name of Your Trust Change if You Amend or Restate It?

The answer is No – the nice thing about doing a Trust Amendment or an Amendment and Restatement is that the original name and date of your Revocable Living Trust will remain the same. That way, all of the hard work you put into funding your Revocable Living Trust under the original trust name and date won’t need to be undone.

 

Presented by WFB LEGAL CONSULTING, Inc.—Lawyer for Business. A BEST ASSET PROTECTION Services Group

IRREVOCABLE TRUST PRIMER

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Here are some general types of trusts that are usually confined to those requiring a bolder implementation of estate planning, either because of certain business activities in which they are participating, and/or the degree of wealth they may wish to protect from certain potential hazards.

Irrevocable trusts cannot be terminated after they are finalized. This sets them apart from revocable trusts which can be terminated, at least until they become irrevocable at the death of the trust maker (the grantor). When talking about trusts, the term “living” means that the trust goes into effect during the grantor’s life.   So, an irrevocable living trust is a trust that 1) goes into effect during the grantor’s life and 2) cannot be revoked. An exception to these general rules is a “testamentary” trust, which is made during a grantor’s life, but does not go into effect until the grantor’s death.

  1. General Trust Terminology  

These terms can get confusing, so here is a breakdown:

Term Definition
Revocable trust A trust that can be revoked.
Revocable living trust A trust that can be revoked and that takes effect during the life of the grantor. Becomes irrevocable at the death of the grantor. Usually made to avoid probate.
Irrevocable trust A trust that cannot be revoked.
Irrevocable living trust A trust that cannot be revoked and that takes effect during the life of the grantor.  Usually made to transfer wealth, protect assets, or reduce taxes.
Testamentary trust A trust created during the life of the grantor, but that takes effect at the grantor’s death.  Usually made as part of a will. For example, a child’s trust is made to name a trustee for property left to a minor.
  1. Types of Irrevocable Trusts

There are dozens and dozens of types of irrevocable trusts made for different purposes.   The two most common reasons to make an irrevocable trust are 1) to reduce taxes, and 2) to protect property.

  1. Irrevocable Trusts to Reduce Taxes

Grantors most often use irrevocable trusts to avoid or reduce taxes.  Here are examples:

  • Bypass Trusts – A trust used by spouses to reduce estate taxes when the second spouse dies. When the first spouse dies, the bulk of his or her property goes into the trust. The surviving spouse can use trust property (and income from trust property), but he or she never owns it. So, when the “surviving” spouse dies, that the first spouse’s property is not included in his or her estate.
  • QTIP Trusts – A trust used by couples to postpone the payment of estate taxes until the second spouse dies.
  • QDOT Trusts – Like QTIP trusts, but used when one spouse is a noncitizen.
  • Charitable Trusts – A trust designed to reduce income and estate taxes through gifts to charity.   Three types of charitable trusts are:
    • charitable remainder trusts – You put property in a trust, name a charity to be the final beneficiary, and then name someone else to receive income from the trust for a set amount of time.
    • charitable lead trusts — You put property in a trust, name a charity to receive income from the trust for a set amount of time, and then name someone else as a final beneficiary.
    • pooled income trust – You pool your money with other trust makers and receive trust income for a set time. For pooled charitable trusts, a charity is the trustee and the final beneficiary.
  • Generation-Skipping Trusts – These trusts are designed to reduce estate taxes for wealthy families.   The final beneficiary is a grandchild or group of grandchildren. The child is usually an income beneficiary, but never owns the property, so that the trust property is not subject to estate tax when the child dies. This type of trust is subject to a generation skipping transfer tax.
  • Life Insurance Trusts – These trusts reduce estate taxes by removing the proceeds of life insurance from a taxable estate.   Instead, the trust owns the insurance policy. The beneficiary of the policy can be anyone, but the trustee must be someone other than the previous owner of the policy.   The grantor cannot have any control over the policy once the trust is made, and the trust must exist for at least three years before the grantor’s death.
  • Grantor-Retained Interest Trusts (GRATs, GRUTs, GRITs, and QPRTs) – These trusts also reduce estate taxes by removing property from a taxable estate.   The trust maker puts property into the irrevocable trust and names final beneficiaries, but retains some interest in the trust for a set amount of time. That interest might be a fixed annuity from the trust (GRAT), a variable annuity (GRUT), trust income (GRIT), or the right to live in the trust property (QPRT). When that set time period is over, the final beneficiaries own the property outright, and the IRS will value the gift at the time of the creation of the trust. The grantor must outlive the terms of the trust, or no savings will be created. 
  1. Irrevocable Trusts for Protecting Property

Irrevocable trusts can also be used to meet other goals, such as to protect assets from being squandered or to protect the assets of a person with a disability.

  • Spendthrift Trusts— Spendthrift trusts allow you to protect (and control) gifts that you give to those who may not be able to manage the money themselves.   You put property into a trust, and the trustee (which can be you) doles out money to the beneficiary according to the terms of the trust.   The beneficiary cannot access trust property on his or her own, so it is protected from the beneficiary’s creditors, at least until payments are made directly to the beneficiary.
  • Special needs trusts —A special needs trust provides financial support for a person with special needs, without affecting his or her qualifications for government benefits. Property is put into a trust for the benefit of a person with special needs, often by a parent or other relative. The terms of the trust allow the trustee to use trust funds to buy certain things for the beneficiary, but because the beneficiary never owns trust property, it is not considered to be an asset when he or she applies for government benefits.
  • Asset Protection Trusts–The only way the trust assets could be protected from creditors of the creator of the trust (hereafter “Settlor”), was for the Settlor to give up complete control of and benefit from the trust and the trust assets. If the Settlor retained the power to serve as trustee of the trust, amend the trust, receive distributions from the trust, or to derive any benefit from the trust, creditors of the Settlor could attach assets in the trust to satisfy debts of the Settlor.

Traditionally asset protection is afforded to beneficiaries of a trust through inclusion of a “spendthrift provision” which specifically prohibits creditors from making claims against a beneficiary’s interest in the trust and prevents the beneficiaries from transferring or pledging their interests in the trust.

However, the creditor protection is generally unavailable to the creator of the trust. If an individual establishes a trust of which he or she is also a beneficiary, a “self-settled trust”, the trust is generally ignored for purposes of the creator/beneficiary’s debts and liabilities.

An asset protection trust is a trust that protects the trust assets from creditors and liabilities of the beneficiaries. That is, as long as the assets are in the trust they are not the personal property of the beneficiaries and therefore, not subject to the beneficiary’s debts.

Under Nevada law for example, if a creditor was a creditor of the Settlor    at the time the Settlor made the transfer to a NAPT, the creditor must commence an action to challenge the transfer within the later of (a) two years after the transfer, or (b) six months after the creditor discovers or reasonably should have discovered the transfer.

A creditor who was not a creditor of the Settlor at the time the Settlor made the transfer to a NAPT must commence an action to challenge the transfer within two years of the transfer. The act that starts the statute of limitations running is the transfer of assets. Therefore, each time assets are transferred to the NAPT, a new transfer has occurred and the statute will begin to run on a claim against that asset.

Finally, even if the statute of limitations does not bar the claim, the creditor is required to show that the transfer was a “fraudulent conveyance.” A fraudulent conveyance is a transfer of an asset with the intent to hinder, delay or defraud the creditor. The intent to hinder, delay or defraud creditors can be inferred if the transfer renders the transferor insolvent. Therefore, the Settlor should not transfer all of his asset into a NAPT.

What makes the NAPT unique is that the Settlor can also be a beneficiary of the trust. The only limitation is that the trustee cannot be required to make distributions to the Settlor. While this can be a limitation to the Settlor, it is outweighed by the benefits of the powers and controls the Settlor can retain and still have creditor protection from the trust.

WFB LEGAL CONSULTING, Inc.–Lawyer for Business–A BEST ASSET PROTECTION Services Group

WHY A TRUST—HERE’S 10 GOOD REASONS

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For years, many estate planning lawyers have implied that everyone should have a trust yet most Americans don’t have a simple will. And yes, living trusts certainly do avoid probate.  But, there’s a whole lot more to a living trust than just that. Here are some factors to consider for yourself:

    1. How much of your estate can you shield from probate?

One of the main advantages of having a living trust is being able to bypass the time and cost of probate, which is a process of administering an estate that can easily cost thousands of dollars and take several months and sometimes years to resolve. Fortunately, not all of your assets are subject to probate. Some exemptions are jointly owned assets with rights of survivorship and assets with designated beneficiaries like life insurance policies, annuities, and retirement accounts.

Remember, however, that your successor trustee is not free to distribute the trust property immediately.  It’s not as simple as that.  Just because your property is in trust doesn’t mean that your outstanding debts don’t have to be paid.  Likewise, the federal government may still want to collect its estate taxes and your state government may still want to collect its inheritance taxes. There may also be trustee’s fees and attorney’s fees as well.

A reasonably efficient successor trustee will be able to determine fairly quickly just how much the potential debts and expenses will be, and he or she will then be able to make advanced distributions accordingly.  In the final analysis, most revocable living trusts are able to distribute property more quickly and with much less cost than is possible through probate.

In many states, you can also add beneficiaries to avoid probate to bank accounts with a POD or “payable on death” form and to investment accounts with a TOD or “transfer on death” form. Your beneficiaries usually will just need to show up with a death certificate and a valid form of ID to get immediate access to the account. California lets you add beneficiaries to everything but real estate. With these methods, you can bypass probate on much of your estate, especially if you don’t own a home.

    2. Will you qualify for simplified probate?

If your probate estate is going to a surviving spouse or domestic partner, or if it is small enough, you may also be able to qualify for a simplified probate process in your state. For example, in California, probate estates less than $150,000.00 in personal assets qualify.

    3. How expensive is probate in your state?

If much of your estate is subject to the regular probate process, you’ll want to get a sense of what that could cost in your state since that can vary considerably. California has some of the highest attorney fees, which start at 4% of the first $100,000.00 of the gross probate estate and can easily add up to tens of thousands of dollars for larger estates. In this situation, a trust is much less expensive in the long run.

    4. Do you own real estate out of state?

This is a reason to have a trust. That’s because unless you have a beneficiary deed in that state, the property will have to go through that state’s probate process with all the costs that entails. Owning property in another country can add another whole layer of complexity. Properties in other jurisdictions that are in a trust can be dispersed to beneficiaries pursuant to the trust in your jurisdiction (where your trust was drawn).

    5. How comfortable are you with the estate being public?

In addition to the time and cost of probate, another downside is that it’s a public process. If you don’t want all those intimate details of your financial life and last wishes to be made public, a trust can protect your privacy. For example, you may not want your heirs to know the division of your assets since they may perceive it to be unfair, which can cause conflict or even legal challenges.

    6. Do you have a child with special needs?

Trusts aren’t just about avoiding probate. Another good reason to have a trust is to provide ongoing financial support for a child or other loved one who may never be able to manage the assets themselves. Providing the inheritance to them directly may also disqualify them from receiving some forms of government support.

But, minor children aren’t the only ones who might squander an inheritance.  Most experts agree that no one under the age of 25 should be given an inheritance outright because they generally are not mature enough to handle large sums of money. Of course, there are many people over the age of 25 that shouldn’t have money either.  Some are spendthrifts at heart, others are in not-so-good marriages, and still others are going through bankruptcy.  Then there are those who are just too frail and incapacitated to manage property on their own.  Giving any amount of money or property to any of these people is never a good idea.

That’s when a trust becomes a vital part of your estate planning; i.e., a trust allows you to give your hard-earned money and property to those you care about while protecting it for them at the same time.

Let’s take a look at a typical example and see how it works.  Let’s say that you have a 20-year old son who is a junior in college.  If you and your wife both die, you’d probably want your son to get all your property, including the equity in your home, your life insurance, retirement plans, etc.  If you reduce all your property to cash, it could easily amount to a good sum of money.  For illustration purposes, let’s assume its $500,000.  Having the executor of your estate write a check to your 20-year old son for $500,000 is probably not a good idea.  Instead, it would be far better to create a trust for the benefit of your son with someone you trust – say a friend, family relative, attorney, or your local bank – serving as trustee.  The trustee would then hold the money and invest it for your son’s benefit until he reached a more mature age, say age 25.  In the meantime, the trustee would use the money to pay for your son’s schooling, his general living expenses, and any other expenses you might specify in the trust instrument – including a down payment on a home or a new business.  Then, when your son reaches the age specified in your trust instrument, the trust would end and all property held by the trustee would be turned over to your son. And, because your son will probably be finished with his schooling at that time and already embarking on a career of his own, he’ll probably be mature enough to make good decisions regarding his inheritance.

7.  Reducing or Eliminating Estate Taxes

Technically, a revocable living trust doesn’t save estate taxes, because there are no provisions in the federal tax laws that exempt revocable living trusts from estate taxes. However, living trusts are often used by individuals and families to take advantage of certain deductions and credits that are allowed under the tax laws.

For individuals dying in 2009, up to $3,500,000 was exempt from federal estate taxes. That exempt amount was made possible by virtue of a so-called “unified credit.” In addition to the unified credit, all property that passed to a surviving spouse was exempt from federal estate taxes by virtue of a so-called marital deduction. The “marital deduction” was unlimited, so you could transfer any amount of money or property to your spouse without paying any estate taxes on it.

For 2010, we had an anomaly in the tax laws, in that Congress allowed the estate tax to expire without coming to an agreement on what the tax rate and the various exemptions and deductions ought to be. Without any further action on the part of Congress, the estate tax automatically returned in 2011, with an increased tax rate and a unified credit amount equivalent to $1,000,000 instead of the 2009 amount of $3,500,000.

Then, for 2011, Congress restored the estate tax, with the exemption amount set at $5,000,000 and the tax rate reduced to 35%. In addition, Congress authorized a so-called portability provision relating to the exemption amount. Prior to 2010, if the first spouse to die failed to use all of his or her exemption amount, the unused portion was lost forever. For 2011 and beyond, that unused portion is not lost; instead, it is carried over to the surviving spouse to use in addition to the surviving spouse’s own exemption amount. That portability provision almost single-handedly eliminated the need to use a revocable living trust to reduce or eliminate the estate tax upon the death of the surviving spouse.

However, unless Congress acts before December 31, 2012, the portability provision will be lost; the exemption amount will be reduced to $1,000,000 and the tax rate will return to 55%. In that case, the revocable living trust will once again emerge as an invaluable technique to reduce or eliminate the federal estate tax upon the death of a surviving spouse.

So, here’s how this simple technique actually works. Assuming that the exemption amount is $1,000,000 and the tax rate is 55%, then here’s what typically would happen when a husband and wife have simple wills and a combined estate that exceeds $1,000,000.

Let’s assume, for sake of illustration, that you (the “husband”) and your wife each have estates worth $750,000. Let’s also assume that you die first and that all your property is left to your wife. Your estate will not pay any estate taxes because of the unlimited marital deduction. Upon your wife’s subsequent death, her estate would then be worth $1,500,000 [her $750,000 plus your $750,000]). Upon her subsequent death, her estate would pay a federal estate tax of roughly $175,000. That’s because her unified credit would shelter only $1,000,000 from the federal estate tax. The remainder of her property ($500,000) would be taxed at graduated rates reaching 55%.

You could eliminate this $175,000 estate tax very easily with a revocable living trust. Let’s assume, for example, that you don’t give all your property to your wife upon your death. Instead, you give her only $250,000 (just enough to keep her under the $1,000,000 exemption amount), with the remainder of your property ($500,000) passing to your revocable living trust. The trust would provide that your wife would be the primary beneficiary during her lifetime so that she could have access to the money if she needed it, with the remainder at her death passing to your children. In that case, no federal estate taxes will be paid upon your death because the property given to your revocable living trust ($500,000) is exempt from federal estate taxes under your unified credit.

By doing that, your wife’s estate will be worth $1,000,000, since she received only $250,000 from you upon your death. Then, upon her subsequent death, her estate will pay no federal estate taxes because the entire $1,000,000 will be exempt from estate taxes by virtue of her unified credit. The $500,000 still in your revocable living trust will not be taxed in your wife’s estate because she doesn’t own it, even though she is the preferred beneficiary and could receive distributions if needed. After all is said and done, your children will receive $500,000 from your living trust and $1,000,000 from your wife’s estate, for a total of $1,500,000, with no estate taxes having been paid – a savings of $175,000.

This very simple but highly effective technique – made possible by the use of a revocable living trust – would eliminate roughly $175,000 in federal estate taxes in the above example. However, as stated above, this technique assumes that the so-called portability provision under the estate tax laws is not in effect beyond 2012 and that the exemption amount is reduced to $1,000,000 and the tax rate is 55%. However, we don’t know at this time what Congress will do for 2013 or beyond. For this reason, it is very important that you consult with an experienced attorney or tax consultant if your estate may be subject to federal estate taxes.

    8. Incapacity and Property Management

One of the major concerns that many of us have today is about our parents living in their own home.  We worry about their bills being paid and whether someone will walk off with their money.  In many cases, we are powerless to help them because all of their property is in their own name.  Unfortunately, without doing some prior planning, the only option we have is to file an application with the probate court to have a guardian appointed for them.  That’s a gut wrenching experience because all their personal and financial affairs will have to be paraded before total strangers, and they will be forced to suffer the indignity and humiliation of being declared incompetent.

It doesn’t have to be that way. A good Trust Estate Plan will be accompanied by a Power of Attorney. However, while a Durable Power of Attorney will allow you to designate the people you want to help you with your financial affairs and manage your assets upon temporary or permanent incapacity, it is only operational while the individual is still alive.

The end solution is a revocable living trust.  A revocable living trust allows your successor trustee to take over whenever you resign or become incapacitated. There is generally no interruption in the management of your property, and there is no court supervision.  Revocable living trusts also enjoy a greater level of acceptance throughout the legal and financial community, and almost all states provide a broad range of statutory powers regarding the management of trust property.  Moreover, while it is true that a living trust isn’t effective unless your property is in the trust, a corresponding Durable Power of Attorney will enable your “attorney-in-fact” to transfer property into your trust if you can’t do it on your own.

    9. Would you like to do something out of the ordinary?

Trusts are a fantastic tool for allowing the continuous operation of your wishes even after you’re gone. An example would be providing additional payments to heirs for taking specific actions like going to college or earning a certain amount of income on their own. Just be aware that the more complex you make the trust, the more benefits it can provide, thereby making it an excellent value in the long term, while simultaneously benefiting you and your family.

    10. Avoiding a Will Contest

If you’re going to contest a will, you have to do is prove that the testator was either incompetent or under undue influence at the precise moment the will was signed.  To contest a revocable living trust, you have to prove that the grantor was incompetent or under undue influence not only when the trust instrument was signed, but also when each property was transferred to the trust, when each investment decision was made, and when each and every distribution was made to the owner or anyone else. That is virtually difficult to do.

Moreover, it costs nothing to contest a will.  All a disgruntled family member has to do is object when the will is presented for probate, then hire an attorney on a contingency fee basis, and wait for the final outcome.  A disgruntled family member has nothing to lose.  On the other hand, contesting a revocable living trust generally involves a substantial commitment of time and money.  Whereas a will contest is heard in probate court, a revocable living trust contest may also be heard in civil court where there are substantial filing fees and formal procedures that have to be followed.

Still, some people argue that will contests are seldom successful, so why bother with a revocable living trust?  The answer is threefold:  First, a will contest puts a screeching halt to the settlement of an estate. Most will contests take a minimum of two or more years to complete and, during that period, no distributions will be made to anyone.  Second, defending a will contest involves lots of attorney time that results in large attorneys’ fees.  Even unsuccessful will contests can end up costing $50,000 or more in attorney’s fees.  And, those fees come out of the estate, which means that much less for the beneficiaries.  Third, many will contests are settled before they ever get to court. In that case, the estate will be further diminished by the amount of the settlement that is eventually reached. In the final analysis, will contests are time consuming and expensive.  The best way to avoid them is by securing a revocable living trust.

 

END GAME:

You should always consult a professional to see whether a revocable living trust makes sense in your overall estate planning. Do you see from the above brief expose’ what a tremendous value a Revocable Living Trust package is—what you actually get in the form of practical and emotional peace and security for you and your family?

My “Trust Package,” as I like to refer to it, consists of all of the following documents, which inter-play with each other:

  • Trust
  • Pour-Over Will
  • Health Care Directive
  • Living Will (Power of Attorney for Healthcare Decisions)
  • Durable Power of Attorney for Assets
  • Trust Certification
  • Personal Property Designation
  • Assignment to Trust

Please make sure you have all these essentials—secured by an Estate professional and particularized to your specific estate needs.