Avoiding Probate: This Missing Link

In my last Retirement Coach Strategy of the Week, we discussed avoiding the costs and delays of probate, and we concluded that the best method to pass on your assets to your children and other beneficiaries is with the use of a revocable living trust.

However, did you know that the overwhelming majority of individuals who establish living trusts still do not avoid probate?


Establishing a trust alone does not avoid probate!

So, what’s “the missing link”?

The missing link is “funding” your trust while you’re still living!

That sounds like a big word, doesn’t it?  Complicated?  No.

Funding simply means re-titling your assets to your trust.

If you stop and think about it, transferring your assets, either during your lifetime or at death, is simply the process of changing the title of ownership to someone else.

If you do this through your will, it will require the cost and delays of probate.

The Missing Link: “Funding” Your Trust

What you’ve just learned is that establishing a living trust allows you to ‘potentially’ avoid probate.

However, if you don’t re-title your assets to your trust prior to your death, the assets still have to pass through probate in order to be re-titled to your trust at your death.

So, what do you do?

The first step is to determine which assets will go into whose trust (i.e. your trust and/or your spouse’s trust).  If your estate planning attorney is doing his/her job, they will spell this all out for you.

The next step is to change the title of ownership on each of your assets, a bank account for example, to your trust so that your statement now reads “Joe Smith, Trustee, for the Joe Smith Revocable Trust” instead of just “Joe Smith”.

Do this with all of your assets so nothing gets left out.

Your estate planning attorney should also spell out how your beneficiary designations should read on your life insurance, IRAs, and annuities.

While you’re completing the paperwork to re-title your assets to your respective trusts, take care of all your beneficiary designations at the same time.  (This is something we do for all of our Relaxing Retirement members as the paperwork can become confusing.)

Print out and tack this Strategy of the Week up on your board so you don’t forget it and lose out on the biggest benefit of establishing your living trust in the first place.

Committed To Your Relaxing Retirement,

Jack Phelps

The Retirement Coach

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