Sonoma Sun ~ Eric Gullotta


The follow-through

Posted on March 1, 2019 by Eric Gullotta

In my office, the average time that people say “I’ve been meaning to do this,” meaning preparing an estate plan, is three years. Not kidding. This means that people are hesitant to look the future in the eye, answer difficult questions, and execute. Or maybe it’s paying my fees, but probably the former. Therefore, we see a lot of clients who might make it in (and hopefully pay my fees) but are unable or unwilling to finalize the process. Here is why that is important.

Some documents are fully effective upon execution: wills, power of attorneys, and advanced health care directives. Even though the advanced health care directive is valid upon execution, we still recommend providing copies to your primary care physician, local hospital, or anywhere that provides you with probable health services. But these aren’t the ones that need further implementation.

The most important document most people have is a revocable living trust. Now this is the one that requires a few extra steps to be operating at full efficiency. Yes, a trust is valid upon execution like the other documents, but unlike the others, a trust is a legal entity and has to be “funded” to be effective. The funding of a trust is a key to its ability to avoid probate and plan for possible incapacity.

The funding of a trust requires either the titling of assets in the name of the trust or assigning assets to the trust. Assets that have a title, bank and brokerage accounts, as well as real estate must have the actual title changed for the asset to be funded to the trust. For assets with no title like your couch or watch, they are simply assigned to the trust via a document prepared by your attorney.

In order to title your bank accounts in the name of your trust you have to get up, drive to the bank, sit there, and endure the red tape none of us like, which is one major reason it doesn’t get done. For your real estate, a new deed has to be prepared (properly) and recorded with the county in which it sits, along with the required preliminary change in ownership report (county form) and recording fees.

Basically, unless your attorney does it for you, it usually doesn’t get done. Without titling your assets in the name of your trust, your plan is less than, if not completely, ineffective.

Certain assets and other financial instruments comprise your estate, and thus are part of your estate plan and also need some implementation. The two most common examples are your retirement accounts, like an IRA or 401(k), and life insurance. The accounts have beneficiaries; these are the people that receive the asset or some form of financial benefit from the asset when you die. This makes getting the beneficiaries correct very important. A financial institution doesn’t care what your intentions were with that account, they are robotic – they will pay to whomever is indicated on the form.

The best example of this is when you have minor children listed as beneficiaries. If you listed your children as beneficiaries and they are now 18, they get that money outright, yes outright. For many parents this is a frightening scenario – an 18-year-old with hundreds of thousands of dollars. Making your living trust the beneficiary of your retirement accounts or life insurance can alleviate this situation. But this requires additional action on your part, which often doesn’t always happen.

Look for an estate planner that will walk you through these implementation steps. As I’ve told many clients, the second step is often the most important… see the brilliant and original title above!


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