San Diego Estate Planning Lawyer Blog
A living trust is a useful estate planning tool that can help avoid extended probate proceedings after your death. Basically, a living trust is an entity you create and transfer property into through a declaration of trust. This declaration specifies how the property within the trust should be distributed after your death. Unlike a last will and testament, trust declarations are not submitted to a probate court. The declaration simply appoints a successor trustee to carry out your wishes.
During your lifetime, you can still control all of the property transferred into the living trust. In most cases, the trust is not even considered a separate legal entity for tax purposes, so your Social Security number remains tied to trust assets like bank accounts. You can revoke or amend a living trust at any point during your lifetime. After your death, however, the trust generally becomes irrevocable, meaning your successor trustee is bound by the declaration of trust.
Always Fund a Trust Properly
It is important to understand that creating a trust involves more than signing a declaration of trust. You must take affirmative steps to fund a living trust. Even though assets put into a living trust remain under your control, you must still take steps to amend the legal title, say from “John Doe” to “John Doe, Trustee of the John Doe Living Trust.” Without taking this important step, the declaration of trust is nothing more than an empty shell.
Here is an illustration taken from a recent California Court of Appeals case, this case is only discussed to illustrate the concepts involved and should not be taken as a statement of the law. In December 2000, Rose D. Bozigian had her estate planning attorney prepare a living trust. Bozigian, a widow with three adult children, transferred a single asset into the new trust, her Los Angeles County residence. To that end, Bozigian signed a new deed transferring the property from herself to the trust.
But in 2003, Bozigian decided to transfer her residence out of the trust. She did this in order to refinance the property. According to court records, Bozigian wanted to help one of her children, Steve Bozigian, pay off some credit card debt. Bozigian, acting as trustee, signed a new deed transferring the residence from the trust to herself and her daughter, Susan Saputo, as joint tenants.
Normally, a joint tenancy means that when one co-owner dies, the surviving co-owner automatically assumes title without having to go through probate. This is known as a joint tenancy with right of survivorship. But in this case, the courts determined Rose Bozigian never intended to create a true joint tenancy; rather, she added her daughter to the deed in order to help secure the refinancing loan.
Rose Bozigian died in 2006. Since she removed the house from the trust three years earlier, the living trust had no assets. Litigation ensued among the siblings over this. The probate court, and later the California Court of Appeal, confirmed the trust was empty. That meant the residence had to go through normal probate.
Don’t Leave Behind an Empty Trust
A living trust may not be right for your estate planning needs. But if you decide to create a living trust, it is important to make sure it is funded, if for no other reason than to avoid unnecessary confusion after your death. An experienced California estate planning attorney can help you determine the best way to protect your assets and minimize legal complications. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.