What Happens to Assets Left Out of your Trust?
We’ve all heard of FOMO, but what about FOLO: Fear Of Leaving Out? That is, the fear of leaving assets outside of your Trust.
I like to think of a Trust as a box. After your Revocable Living Trust is created, an experienced estate planning attorney will work with you to retitle, transfer, and assign your assets into your Trust, thereby placing them inside the box. Going forward, you will continue to work with your attorney to ensure any future acquired assets that should be in the box make it into the box. The idea is to put as many of your assets into the box as you can during your lifetime, so when you die, your designated “Trustee” can take that box and distribute its contents to your beneficiaries.
This works great if all the right assets make it into your box. But what happens if you forget to tell your attorney about a piece of property in Florida left to you by your uncle? Or what if, while on vacation, you purchase a timeshare on a whim and forget to title it in the name of your Trust? Or what if something that was originally in your Trust was taken out, but never put back in again? This comes up when homes are refinanced, because many lenders will not grant loans to property held in Trust. An easy solution is to take the house out of the Trust and then secure a loan. But sometimes, the house never makes it back into the Trust.
If you intended an asset to transfer via the terms of your Trust, what happens when the asset is outside of the Trust when you die? This is when a Pour Over Willcomes into play. If a Trust is like a box, think of a Pour Over Will like a pitcher, pouring any assets left outside of your Trust into your Trust. For this reason, a Pour Over Will is a vital instrument in estate planning.
But unfortunately, it’s not that simple. Like all Wills, Pour Over Wills must be probated, which means involving the court, which means more time and money to distribute assets left outside of your Trust. A Pour Over Will may ultimately save the day, but it comes at a cost. That’s why it is so important to work with an experienced estate planning attorney, not only when setting up your Trust, but throughout your lifetime, to ensure all assets which should be in your box actually are in your box.