Ask The Lawyer, WE CREATED A TRUST, BUT WE’RE STILL PAYING FOR PROBATE – WHY?
WE CREATED A TRUST, BUT WE’RE STILL PAYING FOR PROBATE – WHY?
QUESTION: My parents wanted to put all their assets in a trust for me and my siblings, so that when they passed, the property would not have to go through probate. My father had suffered a major heart attack and – understandably – we all believed our younger and healthier mom would outlive him. Sadly, they both passed away last year, within weeks of each other. Our lawyers told us we have to go through probate to get their money and house into the trust. We’re paying court fees and lawyers’ fees. Shouldn’t creating the trust have kept us out of probate?
ANSWER: Trust creation and administration is a complicated area – and without all the details, it looks like your parents may have made a common error: They did not “fund the trust.” Generally, a lawyer only sets up a trust – the grantors of the trust (your parents, in this case) have to let their bank, insurer, financial advisor, etc. know in writing that the accounts are to become part of the trust. For example, the title of the
deed to real property, if it is to be placed in trust, has to be changed to name the trust as the owner of the property; the name on an individual bank account that is the subject of the trust also has to be changed from John Doe, for instance, to the John Doe Living Trust. Without knowing the context of the arrangement between your parents and their
attorney, we cannot comment on the reason for the apparent omission in funding their
In most cases, placing assets into a living trust does not prevent the grantor from using the assets as s/he sees fit. But failing to complete the process to put the assets in trust will result in what appears to have happened in your parents’ case – on their death the assets do not become part of the trust, and must therefore go through probate. And, as
you’ve experienced, the cost of drafting the trust is now compounded by the time and expense of probate – the process used to determine the value of an estate and to distribute its assets. Your parents’ objective to avoid probate, while reasonable in certain circumstances, cannot be fully accomplished where the trust remains unfunded.
Finally, as noted, because trust administration is a complex area of law; a slight change in the facts, or additional facts, could yield a different result.
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By: Daniel A. Gwinn, Esq.