One of the most confusing things about estate planning is the living trust. For one thing, it can have several different names, including revocable living trust, revocable trust, and sometimes just “trust”. A living trust is called a living trust because it is set up during your life. It is also revocable because you can change the terms at any time, as long as you have capacity.
A living trust is an agreement which lays out provisions by which assets owned by trust are managed, who can manage them and when you die, who gets the assets, if they ever get them at all.
A major selling point (one of many actually) of the living trust is that it can help you avoid probate. Probate is the process by which your assets are administered through the court. It’s a complex, ugly, time consuming and expensive process. Bottomline is something you want to avoid. Ask just about anyone who has ever dealt with the process and they will likely immediately agree and tell you a convoluted story about what a PITA (pain in the ____) it was.
So just how does a living trust help you avoid probate? Well, just having a trust by itself won’t do the trick. To avoid probate with a living trust in Missouri, you need to FUND the trust.
What is funding?
As a concept, think of your trust as a giant box. When you sign your trust, you are going to fund it was something (called a “res”). For my clients, we fund the trust with all of their personal property.
As a concept, think of your trust as a box. Funding the trust is putting all of your assets in the trust box.
In Missouri, a beneficiary deed can be used to put your home into the trust. That document says that when you die, your trust owns the home. Thus, the trustee manages the home and decides whether to sell it, keep it, rent it or whatever is necessary.
Your bank accounts can be re-titled to change from “Bob Smith and Mary Smith” to “The Smith Living Trust Dated _________, 2014”. There are easy methods to transfer the other asses into your trust (IRA, stocks, boats, life insurance). The bottomline is that if you die with a trust that is really an empty box, all of your assets are going to end up in probate.
Legacy Law Center spends a lot of time with clients explaining not only how their trust works, but as you saw above, just as importantly, HOW TO FUND YOUR TRUST.
A fully funded trust will avoid probate and save your family a lot of headaches, time and money.