A revocable living trust is a particularly useful estate-planning device. If drafted and funded properly, it can help ensure the implementation of our wishes for the after-death disposition of our property while avoiding probate and possibly Federal estate tax.
The living trust does not stand alone, however. Other documents are necessary parts of a well-developed estate-planning package. For example, the Last Will and Testament still has an important function as a “pour-over,” or coordinating, instrument, for directing the distribution of non-Trust assets.
Three examples are illustrative:
1. Husband and Wife have a Trust. Husband has an IRA, naming Wife as beneficiary. Husband dies. Then Wife dies shortly thereafter, before she has time to either roll over the IRA to her own name and to designate another beneficiary or to liquidate the account and transfer the proceeds into the Trust. In this situation, Wife’s pour-over will directs that any non-trust assets, such as the IRA account, be distributed to the Trustee of her Trust.
2. Landowner takes his house out of his Trust when he refinances the property, but dies before re-deeding the property to the Trustee of his Trust. His will provides that any property in his name, alone, will be distributed to the Trustee.
3. Many people with Trusts nevertheless keep small amounts of money in their own names or jointly with their spouse or adult child. On the death of the sole account holder or of the surviving joint account holder, the disposition of such funds is directed by the decedent’s will, for example, to the decedent’s Trust.
In California, if the decedent leaves aggregate gross assets of under $100,000, a probate will probably not be necessary. Instead, title to such assets may be cleared by execution of a small estate affidavit. The Last Will and Testament simply states to whom such assets will pass, such as, to the decedent’s Trust.
So, even though the Living Trust may be viewed as the prime building block of estate planning, the will is a significant part of the “mortar” which makes up the legal “wall” which protects assets from misdirection or waste after the owner’s death.
Jerry Kessler practices law in Santa Clarita. He can be reached at 661-255-1001.