Several years ago, while administering a deceased client’s trust, I was closing out what I thought was her last account. As the financial representative and I concluded our telephone call, the conversation went something like this:
Rep: “Now wait, what about this account?”
Me: “Uh, what account?”
Rep: “I see here that she has another investment account with us.”
Me: “No, there are no more accounts. It’s probably one we’ve already dealt with.
Rep: “Are you sure?
Me: “Pretty sure . . . [awkward pause] . . . Alright, alright, so what account is this?
Imagine my surprise when I discovered it was an account that the family and I knew nothing about, and it was worth close to $200,000.00!
My delight soon turned to dismay, however, when I discovered that the account was never titled in the name of the trust, which meant that we needed to open probate. I thought we were finishing up the administration, but in fact we were just beginning. A year later, the money (minus thousands of dollars in probate fees), was finally disbursed to the children.
The story above is true—well, except the dismal ending. In fact, we were aware of that asset when we created her trust and it was properly titled, or “funded,” into her trust. Had it not been, the long wait and hefty expense of probate would have happened exactly as in the story.
A trust only governs property titled in its name; otherwise, the property is “outside” the trust and must be probated. The mistake is both tragic and ironic since avoiding probate is a primary purpose for which trusts are created in the first place.
This situation worked out, but I have had other clients with whom I ended up stuck in probate. It is unfortunately all too common to uncover assets that were not funded into a decedent’s trust, most commonly:
- Real estate acquired after the creation of the trust
- Out-of-state property, time shares, and even international holdings
- New investments or bank accounts
- Life Insurance
Have you had your trust plan reviewed recently? Are all of your assets titled correctly in the name of your trust? Is your trust completely funded?