Have you funded your living trust?

April 28, 2000

© 2000 by Michael C. Gray


Revocable living trusts have become very popular estate planning tools. Their popularity goes back to Dacy's book, How to Avoid Probate.

In many ways, these trusts are used as a substitute for a will.

Assets are transferred to the trust, and the person who created the trust, called the grantor, directs what will happen to the assets after his or her death. The assets of the trust are not subject to probate, the court administered process of transferring assets after a death. The main advantage of avoiding probate is privacy for the family. The probate process is public, but the trust process is private (provided no one contests the trust.)

The most common error that professionals see in helping clients administer estates and trusts is the failure to transfer assets to the trust. If assets are not transferred to the trust, it will not accomplish its goal of avoiding probate.

It is especially important to re-title major assets, such as the family residence and securities accounts, in the name of the trust.

Although many people see these trusts as a way to avoid using a lawyer, it is the lawyer's job to be sure the trust accomplishes the wishes of the grantor. You should get a lawyer's help in assuring the title is set up correctly for the trust assets. There may be side issues, such as property tax reassessment, to deal with. After the grantor's death, the attorney plays an important role in interpreting the provisions of the trust and assuring they are followed.

After the grantor's death you will also need to hire an accountant who is familiar with the rules of administering estates and trusts to prepare estate and income tax returns.

Do you have a living trust? If so, your assignment for this month is to assure that your assets have been properly transferred to the trust.

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Michael Gray, CPA
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