Q: My mother died a couple of years ago and her estate went through probate even though she had created a Living Trust. The attorney briefly stated that this was due to her not funding the trust? What does that mean?
A: Funding the trust is the process of titling your assets into the name of the trust. The trust is like a safe, it can only protect the items placed within it. If your valuable assets aren't kept in the safe, those items won't be protected. However, that safe can be of huge value when used properly. The same is true with a trust.
Your mother purchased the safe, but she didn't put her assets into it. Because the assets were still titled in her own name, it caused her estate to go through probate. If the assets had been titled under the trust, her estate would have been protected from the cost and delay of probate and the assets would have been distributed according to her wishes.
When you create a trust you must always remember to continually "fund" or title all financial assets to the Trust. In Arizona, if you own assets (investments, securities, cash, bank accounts, retirement plans, etc) in your name when you die and the accumulated value is over $50,000, a probate proceeding will ensue. If you own real property in your name when you die valued over $75,000, a probate proceeding will ensue.
Your trust should be regularly reviewed to ensure it is current with the law and your needs, and to make sure you have titled all major assets correctly.
Contributed by MH Arrowhead, Phoenix and Prescott Estate Planning Attorney and Partner, David T. Eastman
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