By: Thomas A. Griesbach 2021
Probate avoidance is one of many considerations in a good estate plan. A revocable living trust is a common way of avoiding probate and is the best option for many (but not all) clients. However, a revocable trust will only avoid probate for the assets held by the trust, or payable to the trust because of a Settlor’s death. Consequently, it is imperative that a revocable trust is properly funded. Creating the trust is step one. The second and often overlooked step is to properly fund your assets to the trust.
I have seen far too many instances where someone went through the trouble of hiring an attorney to draft a well thought out revocable trust only to have a portion of her estate go through probate because she failed to fund enough of her assets to the trust. In Wisconsin you can die with up to $50,000 worth of probate assets (i.e. assets sitting just in your name, with no beneficiary named and no joint owner) before your estate must be probated. Therefore, if you have a trust for probate avoidance purposes, it is imperative that all but $50,000 of your assets are properly funded to the trust or structured in a manner that will otherwise elicit a non-probate transfer (i.e. are jointly held or beneficiary driven).
I should note that certain assets require special tax consideration before they should be funded to a trust. Most notably this includes tax deferred retirement assets such as IRAs, 401ks, and annuities. Before designating a trust as beneficiary of any these assets, or titling such assets in trust, as permitted, you should discuss the same with your attorney and/or trusted advisor.
If you have a trust for probate avoidance purposes, now is as good a time as ever to review your assets to ensure your trust is properly funded.
This blog post is provided for informational purposes only and by its very nature is general. This information is not intended as legal advice.