Next Avenue Logo
Advertisement

Do You Trust Your Trust Documents?

Leaving an asset out of a trust, whether it’s an old crypto account or a new car, could force your heirs into Probate Court

By C.D. Moriarty

Trusts are legal documents that allow you to decide who will manage your assets if you become incapable of doing so and will distribute your assets after you die without having to go through the long, costly and (for some) uncomfortably public probate process.

A person meeting with a lawyer about their trust and living will. Next Avenue
The process of having a lawyer prepare the necessary documents and you signing them is important, what happens after you leave the lawyer's office is just as critical.  |  Credit: Getty

While the process of a lawyer preparing the necessary documents and you signing them is important, what happens after you leave the lawyer's office with signed documents is just as critical.

The creation of the trust is not complete until the trust contains all of the assets you want it to have. Only you, as the "grantor" of the trust can do this. Trusts can include but are not limited to cash, stocks, bonds, business interests and real estate.

This final step often is forgotten once an individual leaves a law office. Yet, it can make or break the estate plan that the trust document sets in place.

A Trust-Funding Checklist

Here are three steps to verify your trust is properly funded with the assets you want:

1. Check the Full Title on Your Accounts. Confirm you changed titles on all of your accounts and properties to the precise name of your trust, as directed by your lawyer.

Trusts can include but are not limited to cash, stocks, bonds, business interests and real estate.

2. Review All of Your Accounts. No matter the size of your bank account, investment account or stock holding, they all need to align with your trust name. This includes online accounts, accounts with cryptocurrency firms or private stock holdings. Unless all of your accounts are titled correctly, your heirs will have to go through probate, costing them unnecessary time and money.

3. Understand Your State Motor Vehicle Laws. Your car, boat, ATV — whatever you have a title on — is property that needs to be passed on legally. New vehicles sometimes drop through the cracks; they will be included in your trust unless you direct it to be included.

When in Doubt, Ask a Lawyer

Depending on your situation and state, your lawyer may advise you to title in joint names or as "Paid-on-Death" (POD) to a descendant. Investigate the best approach for you and then consult a lawyer, keeping in mind that some will want it in your trust and others will not. Never hesitate to circle back with your lawyer to confirm how best to proceed.

When done properly, the legal document of the trust essentially removes the assets from your estate. Not everyone needs a trust. They may be used to ease property transfers after you die or facilitate financial management during your lifetime.

Done properly, trusts can allow your heirs to avoid probate court, its filing fees as well as the added time and complexity caused by backups in most court systems. Probate court wants to be sure your will and wishes are being carried out properly; However, if property is in a trust, it will pass per the trust document without a court process.

What Trusts Cannot Do

It is important to note that retirement plans and life insurance policies are bound by the beneficiary designations you provided when you opened the accounts, no matter what your will or trust says. As you review your estate plan, be sure that your beneficiary forms are updated and correct for your life today.

As you review your estate plan, be sure that your beneficiary forms are updated and correct for your life today.

One day, I was consulting with clients who had a large estate and recently updated and perfected legal documents. The woman in the couple started telling me about the stocks she liked to buy and trade. I asked whether she bought and sold these stocks through her brokerage house.

"One small discount brokerage account I set up for play money," she replied happily.

When I asked how the account was titled, she was clear that it was in her name. "After all," she said, "it is so small it does not matter to our overall estate."

Every Asset Matters

In any case, she added, "it is none of the discount brokerage's business that I have a trust." She did not want to show the discount broker her documents so she opened an account in her name alone.

She was wrong. That account did matter. A probate process would have to open whether she had $100 in the account or $10,000. Basically, her "play" account would create unnecessary work for whoever was left to unscramble her finances after her death.

Advertisement

The same can be said for online accounts, whether they are for Bitcoin or Robinhood or a discount broker. Unless the title is in the trust, this will be a personal asset to be probated.

There is another option. Create a Paid-on-Death account and leave that to another entity, which could be a person. Understand if you do choose to POD the assets in that account to your trust, you will have to present the trust document to the company.

Once you are done with the process of putting money into trust, you can rest assured that your goals are accomplished.

Why not add it to the trust right now? What you can take care of with a financial institution in about a half hour, your heirs will be unscrambling for weeks without you present.

Review Records Closely

Finally, always check with your financial institution if it updates software, merges with another company or experiences any other major change. I have personally seen glitches when my three banking institutions went through changes.

A credit union merger resulted in the loss of trust information from one account. I recognized the error only because I looked closely at a deposit slip. They easily rectified the error.

A bank merger moved my personal account to a business account because it was a trust account. When I caught that issue, within a month of the transition, the institution said it could not switch the business account back to a personal but said it would not charge me business fees.

Trust, but Verify

At a third institution, a software update on their end required me to bring in the documents again and almost start from scratch with my accounts because of their oversight. The time it took was annoying but not as frustrating as if the whole trust was irrelevant at my death and my heirs were left to pick up the pieces in probate.

Once you are done with the process of putting money into trust, you can rest assured that your goals are accomplished. As long as you remember to verify annually that the financial institution, whether it is a bank, credit union or investment house, still has your accounts in the trust. They make mistakes. We do too. We may forget to register a new Certificate of Deposit or a new vehicle; as a result, our families would need to probate an estate because of one asset.

It is your money. Trust your trust by verifying its holdings as you carry on in your financial life.

Headshot of a woman. Next Avenue, charitable giving
C.D. Moriarty, CFP, is a financial speaker, writer and coach, living in the Green Mountains of Vermont where she is working on a memoir. She can be found at MoneyPeace.com. Read More
Advertisement
Next Avenue LogoMeeting the needs and unleashing the potential of older Americans through media
©2024 Next AvenuePrivacy PolicyTerms of Use
A nonprofit journalism website produced by:
TPT Logo