Take care of your trust

By McNichol & Tillem

Dear Len & Rosie, My husband and I have a living trust that includes a family limited partnership for rental houses and my one-person business corporation. I have concerns that things might not have been completed. For example, the living trust has a Schedule A with our assets listed, but I’ve heard that my corporate stock needs to be assigned to the living trust and that the properties need to be deeded. Is this true? How do I do this? -- Karen

Dear Karen, Think of your trust as a large wicker basket. Things you store in the basket avoid probate. Items not in the basket are subject to probate on your death unless they avoid probate by other means, such as joint tenancy or pay-on-death beneficiary designations.

You and your husband need to fill the basket by transferring the title of your assets to yourselves as trustees. It’s your most important job as trustees. If the title to your home says “Bob and Karen, as Trustees of the Bob and Karen Revocable Trust,” then your home is in the trust. Otherwise, it’s outside of the trust and may be subject to probate upon your deaths.

It’s possible to avoid probate if your trust is not funded. Assets found on a schedule of trust assets attached to your trust can sometimes be transferred into the trust by means of a court order under an appellate court opinion in a case named Estate of Heggstad. It’s faster and easier than probate, but should not be considered as a substitute for funding your trust. It requires going to court, and depending on the circumstances and the exact language within your trust document, it may not work.

When you and your husband created your trust, you each should have executed “pour-over” wills. These wills are very simple and do little more than nominate an executor and leave the estate to the successor trustees of your trust.

What they really say is this: “Dear Judge, I’m a dummy because I didn’t fund my expensive trust before I died. Please bill my estate outrageous probate fees. Leave what’s left to my trust so my estate plan won’t be messed up any more than it is already.” Review your wills to make sure they leave your estate to the trust. Pour-over wills are a safety net to protect your estate plan if you mess it up.

Most estate planning lawyers prepare deeds to fund their clients’ real properties into the trust when the trust is created. If your home is not in the trust, you need to have a lawyer or a title company prepare a deed conveying the property into your trust. You should also reissue your corporation’s stock to the trustees of the trust. However, the rental properties you own within your family limited partnership should not be in the trust. Instead, these properties should be titled in the name of the partnership.

If you are still confused, you should review your trust with a trust and estates attorney. Creating a trust is only half the job. You need to finish it by properly funding your trust. -- Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, at 996-4505 or  www.lentillem.com. Len also answers legal questions each weekday, noon to 1 p.m., and Sundays, 4-7 p.m., on KGO Radio 810 AM.

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