Former NFL quarterback, Steve McNair, did not have a will when he passed away. He left behind a wife and four children. Without any estate planning documents to give guidance, there could have been a conflict because two of the children were from a prior relationship. Also, without a living trust, the children may receive their entire inheritance when they are only 18 years old. If McNair had a living trust, and properly funded it during his life, he could have seen the wisdom of avoiding probate, kept his affairs private, and allowed his children to receive their inheritance when he felt they were old enough to receive it.
If you have a living trust, or even a simple will, you are ahead of the game, McNair and everyone else without an estate plan. This is a first down for taking care of your loved ones. But the game doesn’t end there. Gain yardage by creating a living trust and keeping it updated after major life events such as marriage, divorce, the birth of a child or grandchild, etc. The touchdown comes only if you keep your estate plan up to date throughout your life so your family is taken care of no matter when you end the game of life. An important part of making sure your living trust works as intended is funding the trust. Below is an example of what could happen if you, like McNair, don’t prepare for the end game.
Vacation House Fumble
In this scenario, Mr. Smith created his living trust in 1996 and his estate planning attorney helped him properly fund it. All of his assets were transferred to the living trust by the end of 1996. He thought he was done. In 2000, he purchased a vacation condo in another state. The deed said “John Smith, a widowed man”.
Mr. Smith passed away in 2013. Unfortunately, the condo cannot be sold until it goes through probate administration. Also, because it is real property in another state, two probates must be opened, one in Florida and another in the state where the condo is located. There will be filing fees in both states and probably two different attorneys, which may mean double the attorney fees. A formal probate administration would need to be opened so that a personal representative can be appointed by the Florida probate court. The probate judge may require the personal representative to be bonded, another additional cost. Also, the personal representative is allowed to charge a fee. Currently, Florida law states that a reasonable fee for the personal representative in a formal probate administration is three percent for the first $1 million.
Although Mr. Smith’s goal may have been avoiding probate, a desirable goal, he forgot to update funding his living trust when he purchased the new property. As a result, his children had to spend extra time and money before selling the property.
As we go through life, things change. We buy and sell real estate. Children and grandchildren are born. We open bank accounts at new institutions. We change jobs and roll over 401k accounts into IRA accounts. Life happens.
It is important to periodically review your estate plan and your assets to make sure your living trust is funded properly. Sounds like work, doesn’t it? We have a program that shifts the work of reviews and updates to our staff. Stross Law Firm offers an estate planning maintenance program called Peace Of Mind A Life Plan for Everyone. Through this program, you can rest assured that your loved ones will be taken care of.
This is the third article in a four-part series. You are invited to read the first and second articles, which provided explanations of what could happen if someone only partially funds his or her livinhttp://www.clearwaterfloridalawyer.com/the-importance-of-trust-funding-part-2/g trust.
This article is not intended to provide legal advice or encourage anyone to do trust funding without the guidance of an estate planning attorney. Call us at 813-852-6500 to schedule a free 30-minute consultation with an estate planning lawyer.