According to a New York Times article, Michael Jackson did have a Revocable Living Trust in place at the time of his death. A Revocable Trust makes good sense for a public figure because it is privately administered and not subject to the lengthy, costly, and public Probate process. There are quite a few good articles on Epilawg detailing the advantages of holding assets in a Revocable Living Trust. For those of you who already have Revocable Trusts, I want to harp on you to be sure that your Trusts have been properly funded.
I mentioned Michael Jackson in the intro because his Trust had not been funded! As a result, his assets have been subject to lengthy, costly, and public Probate proceedings in the California Courts. Even if you’re not Michael Jackson, it’s still nice to keep your affairs private and to keep things simple for your descendants. As always, this requires planning ahead.
Pour-over Wills
A Pour-over Will typically accompanies a Revocable Trust and covers assets that were not transferred into the Trust during the grantor’s lifetime. Just as the name implies, assets “pour-over” into the Trust. It’s a “just in case” Estate Planning maneuver. Basically, the Revocable Trust is named as the decedent’s sole devisee. Assets are then distributed to the Trust and the Trust, in turn, names beneficiaries and details how the assets are to be used and distributed. But, just because there is a back-up plan doesn’t mean you should rely on it. It’s easier on everyone if the Trust has been properly funded in the first place.
Trust Funding
Typically an attorney drafting a Revocable Trust will also prepare and file Deeds transferring real property into the Trust. If my clients request additional assistance, I will also make sure that bank and brokerage accounts are transferred into the trust. While I am sure that many of my clients have properly funded their Revocable Trusts, I know that it is also common for an individual to forgot about an account or an asset that should have been titled in the name of their Revocable Trust.
So, what should you do to transfer those additional assets? In general, you can go to the local branch of your bank and ask that your checking and savings accounts be “re-titled” in the name of your Trust. Be cautious, a banker may not understand what you are asking for. You are not just opening a general “Trust Account.” You are re-titling your account in the name of your specific Trust, with a specific name, and a specific date. The details referring to your Revocable Trust must be exact and correct and you will likely need your Certificate of Trust and maybe a copy of your Trust document.
Updating certain non-retirement brokerage accounts and individual stocks can be a bit trickier since a “Medallion Signature Guarantee” may be required on the update forms. This Guarantee is almost like a Notary Stamp, but more rigorous. You will need to show statements and proof of ownership of the accounts you are transferring. The person giving the guarantee will probably keep copies of these statements for their records. Many banks and brokers will perform this service. Call ahead and ask for details of what is required for transferring accounts and stocks.
In general, retirement accounts (401k plans, IRAs, etc.) cannot be transferred out of your name and should not be transferred into a Trust. However, you will likely update the beneficiary designations on the retirement account to reflect your Estate Plan. Your Estate Planning attorney will advise you as to how this should be done.
You should seek advice for all Trust funding matters. Any Estate Planning attorney will be pleased that you are being careful and diligent in funding your Trust and will be happy to answer questions. This is also a great opportunity to organize your various accounts. I often tell clients that an Estate Plan says how to distribute your assets, but not always what those assets are. As you are updating your accounts, keep a list of where your assets are held. Perhaps this process will even push you to consider consolidating or simplifying your financial affairs.
