Revoking an Existing Trust
When we say revocable, we usually mean changeable. But revoke also means revoke. If your circumstances change and there are simpler ways to leave your estate free of probate as described in chapter 2, your trust can be revoked so you can use the alternate methods. Or it might be that there has been a divorce or disagreement between the owners of a joint trust and it has to be revoked. How do you do that? Unless your trust has been filed with a probate court, you do not need to sign any special form to revoke it. I know there are lawyers out there who will prepare such a form, but is it not necessary.
The simplest way is to remove all the assets from the trust name and put them back in your own name. If there are unrecorded deeds you signed to transfer your real estate to the trust, merely destroy them and the property stays in its original ownership. If the deed to the trust has been recorded, make a new deed from the trust back to you or in an ownership type as described in chapter 2 (How to Avoid Probate by Using Deeds: The Ladybird Deed).
Beneficiary designations can be changed so that the trust is not the beneficiary; the same with TOD and POD accounts. Titles to vehicles and boats can be returned to your name. The personal property assignment form can be destroyed as well, and a will can be made that automatically rescinds the pour-over will.
The goal is “repeal and replace.” Be sure no assets are left in the trust name and that none will flow to the trust at your death. If the trust owns nothing now or in the future, it is a non-entity. You must then set up your non-trust probate-avoiding plan by way of deeds, beneficiary designations, joint ownership, or TOD and POD designations.
Understanding the Trust
A properly written trust can be lengthy, and depending upon the intentions of the grantors and the composition of their assets, it may seem complicated to a non-lawyer. However, by structuring it much like a book, it can be much easier to understand. Searching for important provisions is also easier if it is properly set up. I like the textbook approach with a table of contents. This should be the very first page of the trust, so that frequently asked questions are easily answered. You can use this format and fill it out yourself if your attorney doesn’t do it this way.
Here is a sample for the John H. Doe Trust.
Necessary Decisions Before Making Your Trust
What your attorney should ask (see Appendix D):
1. What are your assets?
Your attorney will need copies of all deeds, business ownership records, investments, life insurance policies, websites and online assets, collections, vehicle/boat/trailer titles or registrations, business equipment, patents/trademarks, royalties, personal property, leases, expected inheritances, ongoing lawsuits to which you are a party, foreign assets, or out-of-state assets. Providing these now will ensure that no assets are overlooked at your death that would otherwise have to be probated.
At the death of one client, I was asked to assist in inventorying assets prior to an estate sale. I found a manila envelope tucked in among some books on the deceased’s bookshelf. It contained a paid-up life insurance policy worth $250,000. No one knew about this, and if I hadn’t found it, the policy could have gone unclaimed. It is a good idea to have a small personal safe in which you keep a summary of your assets. You might also include a list of owned domain names and passwords to websites and to unlock your computer and telephone to assist in locating assets at your death. You do not want the state to be your heir because no one knew about a particular account or item.
2. What is your family history, i.e. children, marriages, parents, siblings?
Sometimes families become estranged, and whoever is handling your affairs might need to contact all the family members. Children born out of wedlock or from previous undisclosed marriages need to be identified so as to include or exclude them. I have had to hire private investigators to track down heirs whose location was unknown.3. Who will be in charge of your estate at your death (your trustee)?
Be sure to clear this with them since even if you appointed them, they are not required to do this job. Will this person be compensated? Alternates should also be named in the event the first choice is unable or unwilling to be in charge.4. Who will make medical decisions for you?
First and second choices should be named. Again, be sure to ask them if they will agree. In most states they will have to consent in writing.5. Who will handle your affairs at your disability (person with power of attorney)?
See Appendix C.6. How will your assets be distributed at your death (to whom and when)?
Do you want any restrictions placed on asset distributions?7. What if a named beneficiary of your assets dies before you (what happens to that share)?
8. Where do you keep lists of computer, telephone, and internet passwords and usernames?
9. Who do you want to take guardianship of your minor children?
Talk it over with them and have an alternate in mind as well.(To be continued...)
This excerpt is taken from “How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones” by Ronald Farrington Sharp. To read other articles of this book, click here. To buy this book, click here.
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