Your Trust Won't Work
You went through the time, effort, and cost of hiring an attorney and creating a trust, in part, because you wanted to make sure the administration of your assets remained private and efficient, out of the reach of the courts and financial predators. And yet, due to an easily avoidable mistake, your trust just won't work.
Your mistake: Not ensuring your trust remained properly funded with your assets.
The most common mistake you can make after creating your trust is not keeping it "funded," or not ensuring that it actually owns your property. In order for your trust to work - to avoid probate, to remain private, to protect assets from financial predators and creditors - it must own the assets you want it to control. This can be accomplished by either transferring title to the trust during your lifetime or naming the trust as a beneficiary upon death. If neither of these things happen, your trust won't work.
If you are like many people, you may mistakenly think your assets are in your trust if:
01/Your Trust Lists Your Assets
It's not enough for your trust just to list your assets. You can't simply create a schedule of your stuff, attach it to you trust, and call it "funded." If title to an asset isn't transferred to your trust, your trust does not control that asset. If you want real estate in your trust, you need a deed filed with the county recorder showing that the trust owns the property. If you want financial accounts in your trust, you need a new signature card with the institution showing the trust owns the accounts. If you want life insurance proceeds in your trust, you need to name your trust as beneficiary with the institution that holds the policy.
It doesn't matter that your trust says, "I give my bank accounts to my second cousin" if your bank accounts aren't owned by your trust. It doesn't matter that your trust says, "I divide my life insurance between my 19 children" if your trust isn't the beneficiary of the policy.
Merely mentioning an asset does not place it "in" your trust.
02/Your Trust Uses a "Magic Wand"
Maybe your trust says something like "Effective immediately, all of my assets and possessions of any nature and type belong to my trust." This is sometimes called a "magic wand." While some states allow for this type of language, Oklahoma does not.
You can transfer your personal effects - like jewelry, art, tools, books - to your trust using this kind of language. And you should. But the "magic wand" is ineffective for assets with titles - like real estate and financial accounts.
Assets with deeds and titles and records of ownership must be formally transferred into your trust if you want your trust to control them.
03/You Have a Pour Over Will
A pour over will is like any other will with one exception: the sole and only beneficiary of a pour over will is your trust.
Essentially, a pour over will says, "If I die owning assets that I failed to transfer into my trust during my lifetime, I give them all to my trust at death." A pour over will is a useful tool that should accompany your trust, and it helps make sure everything - even the stuff your forgot about - eventually flows through your trust. BUT, it can only transfer assets into your trust at death through the probate process. Just like any other will in Oklahoma, it does not avoid probate.
If one of your goals is to avoid probate, then you shouldn't be relying on your pour over will to transfer assets into your trust. You should do it now.
Simply put: a trust that isn't properly funded just doesn't work. It is essential, from time to time, to review your current assets and ensure they are properly titled or beneficiary designated. You can do this on your own or you can schedule a review with your estate planning attorney. If you have no attorney locally to assist you, we are happy to help you review your funding at any time, even if Tallgrass Estate Planning didn't create your trust.
Here's the stuff we always put at the end: If you want to know more, we would love to talk with you about it. Best part, the conversation about how it could benefit you doesn't cost anything. Call us at (918) 770-8940 or send an email to firstname.lastname@example.org to set up a free consultation.
Disclaimer: Reading this blog post does not create an attorney-client relationship, and it is not formal legal advice. This is for information purposes only. It is always best to speak with an attorney about your questions, assets, concerns, and needs.