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Question:

If a house is inadvertently omitted from being transferred into my revocable living trust, is there a set aside procedure at my death or is the property required to be included in a full probate administration?

Response:

The house would have to go through probate. There’s no workaround.

This is an all-to-common occurrence. The attorney drafts a beautiful trust (perhaps one that only a lawyer can love), but it doesn’t avoid probate because certain assets are not transferred to it. Clients often don’t understand that they need to take this extra step, which means retitling their accounts in the name of the trust. And taking this step can cause it’s own difficulties. For instance, my mother recently took this step and Social Security stopped direct depositing her checks because the name on her account was changed to the name of her trust.

Generally, attorneys try to explain that the trusts need to be funded, but often don’t assist in the process because of the time involved. They could charge for their time, or their staff time, facilitating the transfers but clients may be reluctant to pay more after already paying a substantial fee for drafting the estate planning documents.

With respect to real estate, attorneys generally do take the step of preparing and recording the deed to transfer the property to trust. However, we often don’t take this step for younger clients because it could create more difficulty if they ever refinanced. Banks and other lenders often require that property be in the borrower’s individual name. If it’s in trust, it will have to be conveyed out before the loan can be closed. So, keeping the property out of trust in the first place would avoids this extra step.

Fortunately, if you have a “pour over” will that directs that your estate go to your trust, then the estate plan will work in all other ways other than avoiding probate. Upon your death, the house will go as you direct in your trust, but it would still have to go through probate. Whenever lawyers prepare revocable trusts, they prepare pour over wills as well. But we have seen instances where consumers have created their own trusts, not understood the need to fund their trusts, and not execute pour over wills. In such cases, they have defeated their own plans.

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