If you have a Revocable Living Trust, one of your main reasons for choosing this method of estate planning was likely to avoid probate.
Trusts Need to be Funded
So, you know that you need to fund your trust in order for it to be effective. In other words, you know you need to transfer property into your trust so that the property won't have to go through probate when you pass away.
Would it surprise you to know that, even if you have a Revocable Living Trust that you intend to fully fund, you still need a will?
At first blush, this may not make much sense, because a Revocable Living Trust is designed to help you avoid probate, while a will is designed to go through probate. But here's why you need both:
Why Wouldn't My Trust Be Funded?
People don't always fund all their property into their Revocable Living Trust before they pass away. There can be a few different reasons for this, for example:
• Sometimes, they buy property and just don't have time to transfer it into their trust before they pass away;
• Sometimes, for practical reasons, they intentionally leave property (like motor vehicles) out of their trust;
• Sometimes, they just plain forget.
What Happens When Property is Left Out?
Whatever the reason, if property is left out of your trust when you pass away, and it doesn't automatically pass to someone else through joint ownership or a beneficiary designation, then it's subject to probate. Without a will, property that goes through probate is distributed based on a formula provided by state law. This means that your property might not go to the beneficiaries of your choice.
The Solution
If you have a trust, you also need what's called a Pour Over Will. This is a will that directs all of your probate property to be distributed to your trustee. Once your property clears probate, your trustee will distribute it according to the terms of your trust. So, even though your left-out property has to go through probate, it eventually ends up where you intended it to go.
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