Many people create a revocable living trust believing it will help their family avoid probate after they pass away.
Often, that is exactly what happens.
However, simply signing a trust agreement does not automatically avoid probate. In fact, one of the most common estate planning issues I encounter is a trust that was properly drafted but never properly funded.
As a result, the property that the owner intended to pass through the trust may still end up in probate.
A Trust Only Controls What It Owns
A trust is like a container. It can only control assets that have actually been placed into it.
Creating the trust document is only the first step.
The second—and often overlooked—step is transferring assets into the trust.
For real estate, this generally requires:
- Preparing a new deed
- Transferring ownership into the trust
- Recording the deed in the local land records
If that step never occurs, the property remains in the owner’s individual name.
The Most Common Problem: Real Estate Never Gets Transferred
A homeowner creates a trust, signs all of the estate planning documents, and puts the trust binder on a shelf.
Years later, the homeowner passes away.
Everyone assumes the house is owned by the trust, only to discover that the deed was never changed.
At that point:
- The trust does not own the property
- Probate may still be required
- The estate planning goals may be partially defeated
This is especially common when:
- The trust was prepared online
- The attorney who prepared the trust did not handle deeds
- The client intended to transfer the property later but never completed the process
Out-of-State Property Creates Additional Problems
The issue becomes even more significant when the property is located in another state.
For example, a Virginia resident who owns property in Maryland may create a trust believing they have avoided probate.
If the Maryland property was never transferred into the trust, the family may be forced to open a Maryland ancillary estate after death.
For further information about ancillary estates, visit:
https://gentileproplaw.com/what-is-an-ancillary-estate/
For further information about avoiding Maryland probate fees through trust planning, visit:
https://gentileproplaw.com/avoid-maryland-probate-fees-with-a-trust/
Beneficiary Designations Can Create Similar Issues
Trust funding is not limited to real estate.
Other assets may require:
- Beneficiary designation updates
- Trust ownership changes
- Coordination with financial institutions
A trust that exists on paper but is not integrated with the owner’s assets may fail to achieve many of its intended benefits.
Joint Ownership Is Not Always the Answer
Sometimes property owners attempt to avoid probate by adding a child or other family member to the deed.
While that may avoid probate in some situations, it can also create:
- Gift tax concerns
- Creditor exposure
- Loss of control
- Family disputes
Proper trust funding is often a more flexible and comprehensive solution.
How to Know Whether Your Trust Is Properly Funded
Questions worth asking include:
- Is your home titled in the trust’s name?
- Have deeds been recorded?
- Are investment accounts coordinated with the trust?
- Have newly acquired assets been reviewed?
- Has the trust been updated since it was created?
If you are unsure, a review can often identify issues before they become problems.
The Bottom Line
A trust can be one of the most effective tools for avoiding probate.
However, the trust must actually own the assets you intend it to control.
Without proper trust funding, probate may still be required—even when a trust has been signed.
The most carefully drafted trust cannot accomplish its goals if the assets never make it into the trust.
Need Help Reviewing or Funding Your Trust?
If you have created a trust but are unsure whether your property has been properly transferred, or if you own real estate in Maryland or Washington, DC and want to ensure your estate plan functions as intended, Gentile Property Law Office, LLC can help review ownership and prepare the necessary deeds to align your property with your estate planning goals.
For more information, visit:
To schedule a consultation, visit:
0 Comments