One question that’s been coming up lately in our office is: what happens with a trust when I die? The answer is different for everyone depending on your specific assets and on the terms of your trust.
We begin with assets because the documents establishing asset ownership indicate how the property must be transferred. Before I dive in, let me give you some background information. Every asset (other than tangible personal property such as household furniture) has a piece of paper showing who the owner is. For example, for real estate the owner is found on a deed, and for a car it is the vehicle title and for a bank account it is the deposit agreement. I am going to refer to these papers as “Ownership Papers” for the purpose of this article.
When someone dies, we start with the Ownership Papers. As attorneys, we get copies of the Ownership Papers and read them. Those Ownership Papers govern by way of example. If the Ownership Paper lists a beneficiary, then the asset is transferred to that beneficiary. It does not matter what the trust says. We must first follow the Ownership Papers.
We start with a list of assets and identify what the Ownership Papers say. If the Ownership Papers state that the trust is the owner, then for that asset the Ownership Paper governs. If the Ownership Papers only have the name of the deceased person with no beneficiary designation, but if there is a Will, we follow the Will. If the Will says give it to the trust, then we give it to the trust. The problem is that if we use a Will to get an asset to the trust, we are likely in probate to get that asset over to the trust.
Now, let’s assume we have some or all the assets in the trust. Then, at that point we follow the instructions of the trust.
Here is a recap of the steps you take (notice most have nothing to
do with the trust) upon a loved one's death:
Identify the assets
Identify and review the Ownership Papers
Identify the assets in the trust now or that are being transferred to the trust
Follow the terms of the trust.
In the end, it is just as much about the Ownership Papers as it is the trust.