As a full-service estate planning firm, part of what we offer our clients is the continued relationship beyond the execution of the estate plan. Creating a Will or a Trust is a big step in the right direction, but if a trust is not funded, or if beneficiary designations are not updated, then it is not as effective and may not avoid probate. One step in funding a Trust is taking the time to either retitle accounts or to add beneficiaries making them payable on death.
Funding Trusts
A Trust, Revocable or Irrevocable, is a vessel designed to hold assets and dictate the management of assets in the trust. We create the trust for you, but you must add the assets yourself. Your bank will not allow us to move the funds from your checking account or change the ownership on your savings account. Instead, this requires action on your part to retitle accounts or add beneficiaries to your accounts.
We generally recommend you retitle your non-IRA accounts into your Revocable Living Trust. This is similar to changing an account name after marriage – the account remains the same (same bill pay, direct deposit, etc.) but the legal name on the account has changed. Retitling an account allows the day-to-day transactions to continue uninterrupted, but it means that the Trust is the legal owner of the account now. So, if you (the Trustee) become incapacitated, your successor Trustee can step in an manage your assets with greater ease.
Many banks, and most credit unions, are no longer allowing people to retitle accounts. If the thought of re-establishing your bill pay recipients, changing your direct deposits, and getting a new account number is overwhelming, make the current account Payable on Death to your Trust. When you pass, your account will not go through probate, but will be distributed under the terms of your Trust. However, this option does not allow your Trustee to manage the account if you become incapacitated. Payable on Death is only effective upon death, so a Power of Attorney is necessary if someone needs to act on your behalf during your lifetime. The best course of action would be to open a new account owned by the Trust and slowly migrate funds (and bill pay, etc.) to the new account over time.
Updating Beneficiary Designations for Wills
A Will is not designed to completely avoid probate or provide for care during incapacity. There are still things that can be done to limit (or possibly avoid) probate. Naming an account Payable on Death to a person, or group of people, will make the account pay out directly to that person (or people). The account does not become part of your probate estate and is not subject to probate. A Power of Attorney can authorize someone to act as an agent on your behalf for your financial transactions (including the management of bank accounts) if you become incapacitated. A Power of Attorney is state specific and there have been problems in the past with institutions honoring the documents. The most recent Georgia statute made the current Power of Attorney a stronger and more enforceable document.
Working on funding a trust or updating beneficiaries is a vital part of an estate plan. The documents can be confusing and institutions may not understand what you are trying to accomplish. Working with an estate attorney can help make this process easier. Grissom Law works with you, your financial planners, and bankers to make sure your estate plan is complete, both on paper and in practice. Contact our office at Grissom Law, for a consultation if you need help with your estate plan and making decisions regarding your estate.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney-client relationship between you and Grissom Law, LLC.