One of the more common issues that I uncover when I speak with a family for the first time is regarding their prior estate planning documents that they had prepared several years ago. In many cases, the family will have established a revocable living trust previously, but in many cases, upon review I will uncover that the old revocable living trust will not accomplish their wishes.
This is not because there have been errors in the drafting of the revocable living trust. But, it is because the family has committed some very common errors when it comes to funding their revocable living trust. The most common error is that the family has failed to fund any of their real estate into the name of the trust. In Tennessee, any property that you own in your name at the time of your death will need to go through probate first. Even if you have a trust saying where your property is supposed to go after you die, this will not matter if the trust has not been funded prior to your death. When real estate is involved, this includes transferring your real estate out of your name and into the name of the trust by creating a new deed, and then filing that deed in the local property court records.
In addition, another common trust funding mistake is failing to retitle your financial accounts out of your name and into the name of your trust. As stated above, any assets that you own in your name on the date of your death will need to go through probate court before being transferred to your loved ones. There are many Tennessee families that fail to understand that their financial assets also need to be transferred out of their name and into the name of their trust. This would include retitling your investment accounts, stocks, bonds, and mutual funds, just to name a few. For this reason, it is important to work with an estate planning lawyer that communicates with your financial advisor to ensure that your financial assets are titled correctly so that the trust that you put in place will accomplish your goals and wishes.
Finally, many families fail to update their beneficiary designation forms on their life insurance, 401(k) accounts, annuities, and IRAs. Many of our clients want to put a trust in place where all of their assets will pass to all of their children equally. In addition, many of our clients want to protect their children’s inheritance from future creditors, divorce, or even from their children spending through their entire inheritance. Therefore, many of our clients establish a trust and engage in this advanced planning to alleviate their concerns. However, if you fail to update beneficiary designation forms on the type of accounts I mentioned above, all of this advanced planning will be for nothing.
If you have your children named outright on beneficiary designation forms with your life insurance, 401(k) accounts, annuities, and IRAs, then the children will receive the assets immediately and not in accordance with the customized provisions of the trust documents that you spent all of that time and effort customizing in order to accomplish your estate legal goals and wishes. Therefore, it is very important to update the beneficiary designation forms on these accounts and name the trust as the beneficiary on these accounts.
If you have questions about estate planning in Tennessee, correctly funding your revocable living trust, irrevocable trusts, avoiding nursing home poverty and Medicaid planning, or any other estate planning topics, then I encourage you to attend one of our free live educational events scheduled this month. At these events, you will hear a lot of real life stories about families that paid thousands of dollars in unnecessary expenses, families that were able to avoid unnecessary expenses, and families that were able to protect their assets from unnecessary nursing home costs and expenses.
I look forward to speaking with you at one of our live upcoming events.