You Signed a Trust. Did Anyone Actually Put Anything In It?

Imagine a woman sitting in our conference room with a leather binder in her lap. Her mother died three months ago. The binder is beautiful. Gold lettering on the spine, tabs, a summary page, a revocable living trust signed and notarized eleven years ago.

She says, with real confidence, that her mother set everything up so the family would avoid probate.

Then I ask the only question that matters: what does the trust own?

And we go through the accounts one at a time, and the answer, for every single one, is nothing. The house is still titled in her mother’s name. The brokerage account is still in her mother’s name. The trust is a perfectly drafted document that owns absolutely nothing, and the entire estate is going through probate anyway.

This is the most common and most expensive gap I see, and it almost never gets caught while there is still time to fix it.

What funding actually means

Signing a trust creates an empty container. Funding is the separate step of putting things into it.

That means retitling assets so the trust is the legal owner. The deed to the house gets changed from your name to the name of your trust. The bank account gets retitled. The brokerage account may also get retitled. Certain assets instead get a beneficiary designation pointed at the trust, and some should deliberately not be.

Until that happens, the trust controls nothing, because it owns nothing.

Why it gets skipped

I want to be fair about this, because it is rarely anyone acting badly.

Sometimes the client was handed a binder and a one-page letter saying “you will need to retitle your assets,” and it went into a drawer during a hard season. Sometimes a firm drafted the documents and considered the job finished at signature. Sometimes the trust was funded properly in 2015 and then the couple sold that house, bought another one, opened two new accounts, rolled over a 401(k), and nobody went back to ensure that these new documents are properly titled into the name of the trust..

That last one is the version that catches careful people. Funding is not a one-time task. It is a thing that goes stale.

What an unfunded trust costs you

Probate, which is the whole thing you were trying to avoid. Assets titled in your individual name at death go through the probate process in the county where you resided at time of death. In Georgia that means a petition, a filing fee, notice to heirs and creditors, and an administration that commonly runs several months to several years or more.

Privacy. A probated will is a public court record. Anyone can read it. A trust generally is not.

Control during incapacity. This is the one families overlook. A funded trust lets your successor trustee step in and manage those assets if you cannot. An unfunded trust cannot help, and if there is also no financial power of attorney, the family’s only route is a conservatorship petition in probate court.

The money spent on the plan. Which is the part people find hardest to hear.

How to check your own, this week

You do not need a lawyer to do the first pass. You need a list and an afternoon.

Pull the deed to your house. Georgia deeds are recorded with the Clerk of Superior Court in the county where the property sits, and most metro counties let you search online. Look at the grantee name. Does it say your name, or does it say the name of your trust, with your name referenced as trustee?

Log in to every financial account and read the registration line. Not the nickname you gave the account. The legal title. It will either have the trust’s name in it or it will not.

List everything you own and mark each one. House, land, bank accounts, brokerage accounts, CDs, business interests, life insurance, annuities, retirement accounts.

Then separate out the retirement accounts. An IRA or 401(k) usually should not be retitled into a trust, because changing the owner of a retirement account can trigger immediate income tax consequences. Those are handled through beneficiary designations instead, and whether the trust should be the beneficiary depends on your situation. This is the place where do-it-yourself funding does real damage, so get advice before you touch a retirement account.

The designations nobody rereads

While you are in there, look at the beneficiary designations themselves.

Beneficiary designations and payable-on-death labels override your will and, in most cases, your trust. The form you filled out when you opened a 401(k) in 1998 is still controlling, and it still names whoever you wrote down then.

I have watched a life insurance policy pay out to an ex-spouse because a form was never updated after a divorce. The will said something entirely different. The will did not matter.

Three things to carry with you

A trust that owns nothing does nothing. The binder is not the plan. The act of funding the trust through titling/retitling of your assets is the plan.

Funding goes stale. Every house you buy, account you open, or rollover you do is a new thing that needs to be pointed in the right direction.

The check is free and takes an afternoon. Pull your deed, read your account registrations, and look at your beneficiary forms. If any of them surprise you, that is the finding.

This Is Educational, Not Legal Advice

This is being presented for educational purposes only and nothing here should be treated as legal advice. What applies to you is very fact specific to your circumstances. I am licensed in Georgia and Michigan only, and this area of law changes frequently. If you are outside Georgia, take the foundation here and go find a wealth protection attorney in your jurisdiction.

Your Next Step

If you want someone to go through your deed, your account registrations and your beneficiary forms with you, bring your list. We offer a complimentary 15 minute Strategy Session with one of our non-attorney team members. Call 404-549-5001 or schedule online at elderlawgeorgia.com/contact. Fifteen minutes is usually enough to tell you whether there is something worth doing and how quickly it needs to happen.

   

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!