Before It’s Too Late - Eric Gullotta


Keeping your trust tuned up

Trusts are assets, at least you should think of them that way.  Trusts are like any other assets we own — they must be maintained after we buy them. If you keep them tuned up and give them some TLC, you’ll get more out of them, sort of like a car.  If you forget about them, fail to maintain or even review them from time to time, then they’ll eventually become worthless, or at least worth less.

Let’s say you have a living trust prepared. Good job. But now that you have it you throw it on the shelf and forget about it. Did you even title your assets in the name of the trust? Accounts at banks and brokerage houses need to be titled in the name of your trust by contacting the bank and completing some relatively simple forms. If you don’t do this, your trust will likely not be operating as it was designed.

How about transferring your real estate into the trust? Did you do that? Some attorneys like me, will handle the real estate transfers for you, but some don’t so you need to be careful.  If your real property isn’t transferred in, it is going to go through probate or in a best case scenario; your kids are headed to court to file a Heggstad petition to ask a judge to title your house into the trust so you can avoid probate.  Let’s face it, if you or your kids end up in court then something went wrong.

OK, you’re a responsible person and did everything you were told to do by your attorney at the time your trust was created. But now you bought a new house, rental property or opened a new bank or brokerage account. Did these new assets get titled in the name of your trust?

If you failed to open the accounts in the name of the trust or transfer them after opening, then your estate plan won’t be the well-oiled machine you expect it to be. It will be a sputtering mess that may not get you where you need to go.

If your new home wasn’t titled in the name of the trust, it is even worse than failing to transfer it in the first place. Typically real estate you own at the time the plan was created is listed on the schedule A to the trust (this is the schedule that lists the trust’s assets). If the real estate is not listed on this schedule, the court can’t transfer the house into the trust after you die as was mentioned above. Your beneficiaries’ only choice is a probate.

If you acquire real estate after you create your trust it is quite simple to title it in the name of your trust. You don’t even have to go through your attorney to do so (don’t they get paid enough already?). When you purchase real estate the title company handling the transfer, will ask you “Who is buying this?” or “Who will be the title holder?”  The answer should almost always be your living trust. Your living trust has a proper name, such as the Steve Smith Revocable Living Trust dated January 1, 2014, that should be how you take title to your new real estate.  When in doubt, consult your trust documents or your attorney on how to title assets in the name of the trust.

Maintaining an estate plan, like maintaining a car, is something you may feel comfortable doing on your own. Changing the oil, adding air to the tires and adding windshield wiper fluid is something many of us do. But we also need to know when it is time to call a mechanic. The same issues apply to your trust – know when to call your attorney to ask about a transaction or issue related to titling your assets that may be outside your comfort zone.

Most attorneys will point you in the right direction without charging you anything. But if you don’t call, they can’t help. If some actual legal work must be done, then sure there will likely be a charge. But the amount they are charging you now is much less than the amount they will charge your kids to fix it after you die. Keep that trust tuned up and it will be running when you need it.

Eric S. Gullotta, JD, CPA, MS (Tax) focuses on estate planning and taxation law. His office is located at 232 West Napa Street, Suite A, in Sonoma. Contact him at 938.7234 or visit Gullottalaw.com.

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