Transferring Property into a Living Trust: An Essential Move to Avoid Probate

At first glance, estate planning might seem like a complex, overwhelming task reserved for the elderly or extremely wealthy. However, taking the right steps to secure your assets and protect your loved ones is important for everyone. One of the most efficient and effective tools you can use in this process is a living trust.

A living trust, also known as an "inter vivos" trust, is a legal entity created during an individual's lifetime to hold and manage assets. Unlike a will, a living trust can help avoid the lengthy and often costly probate process after your death. But for a living trust to function as intended and successfully bypass probate, there's an essential step that many overlook - you must transfer your property into the trust. Creating the trust is not enough; it has to 'own' the property to avoid probate.

Why Property Must Be Transferred into the Trust

In the eyes of the law, the trust is a separate entity from you. When you create a living trust, you do so with the intention of the trust holding your assets. This means transferring ownership of your assets from your name to the name of your trust. This process is often referred to as "funding" your trust.

When you pass away, only the assets held in your name go through probate. If your property is titled in the name of your trust at the time of your death, it doesn't need to pass through probate because, technically, you do not 'own' the property – the trust does. Thus, it's imperative to ensure all intended assets are properly transferred into the trust.

The Risks of Neglecting This Crucial Step

If you fail to transfer your property into the trust, the purpose of creating the trust could be negated. Assets not transferred into the trust will be subject to probate. Probate can be a long, drawn-out process that might take months or even years to complete. It can also be expensive, eroding the value of the estate due to legal and court fees. Moreover, probate records are public, which means your estate will lose the privacy that a trust could have provided.

How to Transfer Property into a Living Trust

Transferring property into a living trust typically involves changing the titles of the assets from your personal name to the name of your trust. For real estate, this requires drafting a new deed for the property in the name of the trust. For vehicles, you'll need to change the title of the car to the trust's name. For bank accounts and non-retirement investment accounts, you'll need to change the account holders to the trust.

Periodically Review Your Trust

Life is not static and changes can occur frequently—acquisition of new assets, sale of assets currently in trust, changes in family structure, or shifts in your wishes for the distribution of your assets. As such, we advise you to periodically review your trust to make sure that all of your significant assets are included and properly titled.

Merely creating a living trust does not suffice to bypass the probate process. It is critical to ensure that you have transferred your property into the trust so that the trust 'owns' the property. By taking this essential step, you can save your loved ones from potential legal complications, respect their privacy, and preserve the value of your estate. Take the time today to review your living trust and confirm that all your assets are properly titled.