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It’s a common mistake for people to assume that after creating a trust, their work is done. If your assets are not properly titled to the name of the trust, a whole host of issues can arise when the time comes for trust to be administered. What’s worse is that the purpose for creating the trust could be defeated by failing to properly fund the trust.
Tom owns assets all over the country. His goal is to avoid probate in:
- A home in New York, where he lives;
- A bank account and brokerage account in his name alone;
- A condominium in Florida; and
- A ski chalet in Vermont.
Tom goes to an inexperienced attorney and has a revocable trust created, but does not retitle any of his assets to the revocable trust. A few years later when Tom passes away, his will must be probated in New York, Florida, and Vermont in order to administer his estate and distribute his assets to his loved ones.
Unfortunately, since the nominated executor of the will must now contend with the laws of New York, Vermont, and Florida, there will be additional delays and unnecessary expenses to the estate, which could have been avoided had he properly funded his trust. Also, the need to probate Tom’s will in three different jurisdictions creates an opportunity for the will to be contested in multiple jurisdictions.
Trusts are often used for this purpose: they allow the trustee to distribute or administer various assets through one convenient document without having to go through the court system.
A trust is a common estate planning tool, but a lot of people make the mistake of not funding it.
Any asset that you would like to pass—pursuant to the terms of your trust—such as stocks, cash accounts, annuity contracts, life insurance policies, real estate, personal property, etc., should be retitled or assigned to the trust. Alternatively, it may be possible to state the trust as a beneficiary designation of a particular asset.
When Wills and Trusts Collide
When an executed will doesn’t flow through to the trust, and those documents conflict, it could create a problem, especially if the trust was never properly funded with the assets that the creator of the trust intended to include.
Let’s say that your will provides that your property go to your family. Then, you have a trust in which you’ve designated a close friend as a beneficiary. You are adamant that your friend should get some of a particular asset that you want to put into the trust.
If you die without putting that particular asset into the trust, and your will doesn’t state that the asset shall be distributed to the trust, then the purpose of the trust has been defeated, and the asset will pass pursuant to the terms of the will, not the trust. Your friend will get nothing, and your family will get whatever is in the estate. This could prevent you from having your wishes honored.
Don’t make the mistake of transferring your assets into your trust incorrectly. Title your assets properly. Contact the Russo Law Group P.C. to discuss your situation.
Eric J. Einhart
Russo Law Group, P.C.
100 Quentin Roosevelt Blvd., Suite 102
Garden City, NY 11530