I’m an Estate Planning paralegal with a focus on Trust Administration. Trust administration is the process of carrying out the terms and wishes of the creators of the trust because something has happened to them – such as incapacity or their passing away. Unfortunately, in all the years that I have been a Trust Administration Paralegal, I have never run into an administration where the Trust and the assets involved were 100% properly aligned with the document specified. That’s probably hard to believe since I’ve worked on many, many dozens of plans during this time. Even though there are avenues for remedying these situations, almost every time, this has caused the beneficiaries and/or trustees additional stress and anguish in the weeks and months after losing their loved ones.
Unfortunately, establishing a trust, no matter how thoughtfully and carefully it is created, does not automatically avoid probate or the pains of administration upon your passing. Ensuring that your assets are aligned with your estate plan does alleviate A LOT of that pain and frustration. This is a concept a lot of our clients looking to establish a trust don’t realize until it’s too late or until they actually have to administer the loved one’s plan.
A trust can be thought of as a map that goes to a treasure chest; if some of your jewels aren’t in the treasure chest, it becomes difficult for your successor trustee or other loved ones to find and claim them. The “simple rule” is this: your assets won’t flow to your loved ones unless your assets are aligned with your plan, whether that be titling your accounts and/or real property in the name of your trust or designating the proper beneficiaries on accounts that are titled and distributed outside of your trust (e.g. many retirement plans and life insurance policies). The most common situation we have seen and one of our biggest areas of concern when we first meet with a client to administer a trust due to a loved one’s passing, is the real property not being properly titled in the name of their trust.
If you don’t have the title to your real property (or properties) titled (aligned) in your trust, regardless of how you intended your assets to flow at your passing, your named Trustee won’t be able to transfer the property or funds you intended to give to your loved ones. What we often see is that title to a piece of real property was left outside of the trust due to either due to a refinancing with a lender that required them to take it out of their trust (and promised to help put it back in but didn’t) or during a purchase of a new property, our clients never informed the escrow company of their Trust name to have them take title properly. These errors are understandable because establishing a trust gives most people comfort in knowing they have a written instrument to help carry out their wishes when they are gone. Though, if they were to pass away in any of those situations, the real property could possibly be subject to additional administration through a court proceeding or even a formal probate!
The title to the assets is essential in ensuring a smooth administration upon your passing and as part our Legacy Plan, we keep track and assist in ensuring any assets you currently have or any acquired assets would be aligned with your plan to avoid any unexpected administration complications or expenses. The real goal is to prevent the additional frustration for your loved ones, because you established the trust so they shouldn’t have to worry once you’re gone!
This is just one example of how things could go sideways even for someone that does have a Trust established. Beyond the additional costs and time it takes to administer the assets that are not properly aligned, these situations cause the family additional stress and uncertainty at an already-difficult time.
Shane Mirghanbari serves as an Estate Planning, Trust Administration and Probate paralegal at the firm.