Putting Stuff “In the Box”
We often refer to a Revocable Living Trust as a “box”. Actually it’s a customized stack of paper with a lot of words on the pages – but it’s helpful to think of it as a box. When a Revocable Living Trust is first created and signed, think of it as an empty box with nothing in it.
After a trust is created your job is to make sure everything is titled to trust (“put in your box”) as quickly as possible. By doing this, the assets titled to trust are subject to control of the initial trustee (probably you) and the successor trustee (maybe one of your kids) in the event of your death or incapacity.
Bob & Mary’s Trust
As an example, let’s assume that Bob & Mary Browinkle created a Revocable Living Trust. The name of the trust may be Bob and Mary Browinkle Living Trust, dated January 1. 2020 (date of signing).
Bob & Mary’s savings account is currently titled in the name of Bob & Mary Browinkle. If they wanted to “put it in the box” they would retitle it to Bob & Mary Browinkle Living Trust, dated January 1, 2020*. (You would obviously use the name of your trust, which would have a different name and date).
Bob & Mary may also have other assets that they would also want to title to their trust such as: brokerage accounts, checking accounts, car titles, land deeds, etc.
Some assets such as IRA’s, 401(k), or Life Insurance can pass to your trust at death. Bob & Mary decided to name each other as primary beneficiaries on each of these assets, then to name their trust as contingent beneficiaries.
You don’t have to title assets to trust. You can choose to leave certain assets outside of trust. As an example, Bob & Mary are the trustees of their trust, therefore they are the only ones that can act on its behalf. But Bob & Mary travel some since they have retired and want their daughter Betsy to be able to write checks on their account.
Therefore, Bob & Mary have chosen to leave one checking account out and have it titled to Bob and Mary and Betsy as joint account holders. Upon Bob & Mary’s death, Betsy would own the proceeds of this account. This account would not be passed according to the terms of the trust since it would never have been titled over.
The best time to make sure that you put everything in Trust is to make a listing of all of your assets at the time of creation. Once you have created the list, you can decide what will be included and excluded.
Make sure to have a discussion with your attorney to learn how to effectively retitle each of the included assets. Then take action to ensure that everything has in fact been titled over to your trust. This process may take a few weeks since you may have to notify some of the account custodians by mail of your decision to retitle the account. The key is to stay on top of this situation until you’re sure that everything has finally been titled as you have designated.
But What if You Forget Something?
This is where the Pour Over Will springs into action. At the same time you sign your trust, you may also sign a Pour Over Will. A Pour Over Will is a special type of Last Will & Testament. The purpose of this will is to “pour over” any assets to trust that were left out during the trust funding process.
For example, if Bob & Mary had a seldom used savings account at an out of town bank that didn’t get titled to trust, the Pour Over Will would serve to “pour over” this account to trust to be managed by the trustee.
The catch is that if you leave assets outside of trust and have to rely on the pour over will to move assets to trust, then you will have to go through probate. The probate process would not be required for everything, but only for assets that were titled in your individual name after your death. Assets that had been efficiently titled to trust would pass according to trust. Only assets left out of trust would go through the probate process.
Speed is Key
So again, the key is to get everything titled over to your trust as quickly as possible. AND since you may change accounts from time to time, it’s important to do a quick annual review to make sure everything is titled the way you want.
Funding is an important part of the trust creation process. Once your trust has been established, then the next critical step is to get all assets titled over to your trust that you want to be controlled by your trust.
At ELP, we work to protect you!
We work with people to do various types of estate planning. There is no one size fits all plan and no plan is categorically better than others. The key is to meet with your attorney (hopefully us!) to discuss your unique situation and have a plan crafted that is best for you. If you or your declining parent is not 100% sure of their beneficiary designations, please be proactive and give us a call before you (or they) lose capacity.
Without a properly flexible plan, how will you care for your declining Loved One, be there for your family, get work done, and pivot in the event of a crisis? What about cost? How will you pay for it all? If you make the Assisted Living Facility choice, how long will the money last? Together, we can craft a proactive plan! Lets get started protecting your assets!
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We have covered some legal topics in this edition and as always, I want to emphasize that (1) the law is different in every state, so if you live in a state other than Arkansas, just know that the law may be totally different in your state; (2) your situation is unique, so one size doesn’t fit all – meaning what we discuss herein may not be right for you; (3) we have purposely over-simplified many of the topics above (otherwise this would be many pages long and unreadable because of all of the legalize). It is imperative that you meet with your attorney (hopefully us!) and get a plan that will work for you. Don’t try to plan based on what you read in this (or any) article AND don’t try to go it alone. Please consider this, get your questions answered and take action.