Saturday, April 17, 2010
I am often asked to review and amend living trusts or family trusts that have been not been originally prepared by me.
Tragically, some of these turn out to be a "botched trust". A "botched trust" is a trust that will ultimately fail when the creator or creators of the trust pass away. In other words, a "botched trust" is a worthless piece of paper.
The most common example is the "unfunded trust". The person or couple has paid for a trust to be prepared, and they have signed it, but the all-important steps to fund the trust have not taken place. There is no probate avoidance, because the assets have not been titled in the name of the trust. The trust is unfunded.
An example of the worst type of "botched trust" was recently sent to me by a friend of mine. His elderly mother, who lived up North, had paid someone to prepare her living trust. Not only was it unfunded, it had never even been signed.
This "unexecuted trust" had been prepared, placed in a fancy notebook, and given to the elderly woman who put it away thinking she had a trust. Inside the notebook my friend and I discovered the original trust document with "sign here" stickers on the execution pages. This lady in fact had no trust, just papers she had paid someone for, because the person who sold her the trust had not even bothered to oversee her signing of the documents. And, of course, it was unfunded.
In every case where I come across unfunded trusts or unexecuted trusts, the trust was sold to the client by a non-lawyer. These individuals who peddle these botched trusts often use the title "Estate Planner".
It is important to know there is a big difference between an "Estate Planner" and an Estate Planning Attorney! Only an attorney can lawfully provide legal advice. An attorney has to comply with certain standards of competence that a non-lawyer does not.
An attorney should never use the title Estate Planner, instead the title of attorney or lawyer should be clearly used.
The bottom line: Know who you are dealing with --- If they are a lawyer, they will say so. If they are Estate Planner, know that you are not receiving competent legal advice, and you may be paying for a "botched trust".
Please visit my website for more information about Living Trusts, Family Trusts, and Estate Planning:
DWIGHT EDWARD TOMPKINS
Attorney at Law
This blog is intended for informational purposes only, and is not intended as substitute for legal advice from a qualified attorney in your jurisdiction.
Wednesday, April 7, 2010
Funding a living trust or family trust is a critical step in achieving the goals of the trust estate plan.
Failure to properly fund a trust will result in an overall failure of the trust itself to carry out its objective of avoiding probate, saving the family money and time, and making succession to the assets easy.
As a rule of thumb; real estate, tangible personal property, non-retirement bank-savings-credit union-brokerage accounts, stock and bond certificates, and book entry investments MUST GO INTO THE TRUST.
Retirement accounts, life insurance policies, small checking accounts, automobiles, and annuities do not go into the trust.
Unfortunately, after the trust is formed and initially funded, many clients forget about keeping the trust funded.
They will buy new real estate and fail to have it titled in the name of their trust. They will open new accounts, again failing to put the account ownership in the trust's name.
The unintended result will occur when the client dies, and the family is required to probate the real estate and/or accounts, inspite of the fact that they have a perfectly good trust set up.
If you have a living trust or family trust, you should review it every year and look carefully at funding. A good time to do this is at tax time because you are already getting out files and papers for review for preparation of taxes.
An annual review of your trust's funding is a critical step in keeping your trust active and effective.
Dwight Edward Tompkins
Attorney at Law
This blog is intended for informational purposes only and is not intended as a substitute for legal advice from a qualified attorney in your jurisdiction.
Please visit my website for more information and resources on estate planning, living trusts, family trusts, wills, powers of attorney, trust funding, and other legal matters concerning estate planning and administration.