Signing your Living Trust is only half the process if you are concerned about protecting yourself and your loved ones in case you become incapacited or die. The funding of your Living Trust is actually more important in completing proper estate planning.
What does “Funding your Living Trust” mean? It means transferring title of your real property and other assets out of your name as an individual and into the name of your Living Trust. Think of your Living Trust as a bucket that holds title to your real estate and money accounts. The Trust language identifies who is to manage your assets and what they are to do if you become incapacitated, and also who is to receive your assets after you’re gone. If you don’t transfer your assets to the Trust while you’re alive and competent then the Probate court has to do it for you before the terms of your Living Trust can control the disposition of your estate.
Funding real estate into your Living Trust requires recording a new deed for each piece of property in the county the property is located. Transferring money accounts requires signing new paperwork with each of your financial institutions. Simply signing a letter that states that all of your assets and real estate are now part of your Living Trust doesn’t cut it.
In California, assets which are held in an individual’s name alone and do not pass through joint ownership or beneficiary designation must go through Probate if they total more then one hundred thousand dollars.
Probate is a public proceeding so anyone can go into court and find out what you had and who you left it to regardless of whether they are related to you or not. Probate is time consuming and takes a minimum of seven to eight months and often longer. During this time the assets are frozen and hard for your loved ones to access if they need them. Probate is also expensive. In California, attorney’s fees to Probate an estate are written out in Probate Code Section 10810 and are based on the size of the estate and the fair market value of the real property. The statutory attorney fees to probate a one million dollar home whether it has fifty thousand dollars of equity or is fully paid off is the same in both cases and will be twenty three thousand dollars. Executors get paid the same as the attorney and these fees do not include other court costs, fees and expenses.
If you become mentally incapacited without having funded your trust then there is nothing in the bucket for your successor trustees to manage on your behalf. They will need to initiate a conservatorship in Probate Court so a Judge can decree that they have the power to manage your assets. The judge then continues to supervise your conservator until you recover or die, and like a death Probate, it will be public, expensive and time consuming.
An unfunded Living Trust is just a Will. Make sure your Living Trust is properly funded.
Written by Barry W. Finkelstein, Edited by Dan Joy
Barry W. Finkelstein is an attorney at law that specializes in providing counseling to couples, families, individuals and business owners throughout the bay area on estate planning, asset protection, wealth preservation and business succession. He believes that providing his clients with a thorough understanding of the estate planning process is the first step to creating successful preservation of assets and resources should one die or become disabled. He works collaboratively with other professional advisors such as financial planners, insurance agents, and CPAs to ensure desired results at every stage of life. For more information visit Barry’s website at http://www.alamedalaw.com/index.php.
