It is not unusual for a prospective client to call and tell me, “Mom and Dad had a trust. They have both passed away. The bank is telling me to go to probate court to access the funds…I thought having a trust prevented having to go through probate.”
Having a Trust is a probate-avoidance tool, but in order to successfully avoid probate, the trust needs to be “fully funded.” This means that your assets need to be re-titled from your individual name to the name of your trust. Alternatively, you may list your trust as a pay-on-death beneficiary. Often times, after you establish your trust, your attorney will give you “homework” and tell you to contact your financial institutions and re-title your accounts to your trust. Not realizing the importance of doing so, or recognizing that re-titling assets and filling out forms are time consuming, many people simply ignore, delay, or incorrectly handle their funding homework.
Your trust acts like a bucket. The assets that you place into this “bucket” are then controlled by the terms of the trust and are distributed accordingly – outside of probate court. When assets are left outside the “bucket” (i.e, in your individual name), the trust does not control those assets, potentially triggering probate.
Under Arizona law, in determining the need for probate, it must be determined if:
(1) a decedent has assets titled in their name alone (outside of a trust);
(2) is there a beneficiary designation for the asset; and
(3) is/are the value of the assets above the probate threshold?
If the assets are held outside of a Trust, with no beneficiary designation or joint surviving owner, and the value exceeds the probate threshold ($75,000.00 for non- real property and $100,000.00 for real property), then probate is required.
The bottom line is, even if you have a trust, it does not automatically prevent probate. You must do your homework to ensure proper trust funding. Your financial advisor and your attorney can work with you to help ensure that your trust is “fully funded.”
A trust is a valuable probate-avoidance tool, but only to the extent that it is properly funded. How your assets are funded to the Trust will depend upon your assets, goals, and objectives. Unlike most estate planning law firms, we handle trust funding for clients and are familiar with change of ownership, beneficiary forms, deeds, and all other documentation required to properly coordinate assets via trust and non-trust transfer upon death. We like to say that a Trust without proper “funding” is like an expensive coffee table book; it looks great but is not actually that functional. If you have a question about funding your trust or just need a review, contact our experienced attorneys at Bivens & Associates, PLLC.
-Rachel S. Zaslow, Esq.