What happens to assets not in your trust?
Living trusts are becoming a popular estate planning option for many people vs a will or joint ownership. Establishing a living trust saves the cost and time involved in having to go through the probate process, saves on estate taxes, and allows you to maintain control over your assets during your lifetime. If you’re trust is revocable, you have the option to go back and change it at any time prior to your death.
Once you set up your living trust, then the next step is funding it. Funding your living trust is the process of transferring your assets into the trust. You’ll need to change the titles of your assets from your name or joint names, if you’re married, to the name of your trust. In addition, you need to change most, if not all, of your beneficiary designations to the trust.
So, what happens to any assets not in your trust at the time of your death? Perhaps you’ve acquired new assets in the years after establishing your living trust and neglected to transfer them, or you left some assets out of the trust when it was originally set up.
Failing to fund your trust with all of your assets can result in a costly probate process which means more court time and fees to come out of your estate. Additionally, it will be a longer time before your estate can then be transferred into the name of your living trust beneficiary or beneficiaries.
Therefore, it’s very important to take the necessary steps to ensure that your trust is completely funded with all of your assets before your death.
In addition to your living trust
A “pour-over” will can take care of the problems that arise from assets that are left out of your trust. A pour-over will states that any assets that are not in your trust at the time of your death should go into it. You’re named as the trust beneficiary of any property not in the trust and that doesn’t pass directly to a living beneficiary such as one that’s been named in your life insurance policy or on your retirement accounts.
Unfortunately, there are some limits to using a pour-over. The property that passes through a pour-over will must go through probate before it can be transferred to your trust. The result is that it may take months after your death to distribute the assets in the trust to your beneficiaries.
That’s why estate planning professionals recommend that you do an annual review of your trust documents to ensure that any new property acquired within the last 12 months goes into the trust.
Full estate planning services
At the Law Office of David W. Foley, an estate planning firm in San Diego, our comprehensive trust packages include pour-over wills to help you deal with issues pertaining to any assets outside of your trust.
We’re a full service estate planning firm dedicated to providing the best service when it come so to drafting living trusts, pour-over wills, powers of attorney, and other legal services.Schedule your FREE Consultation