When I meet with clients for the first time, they are often surprised to learn there is so much more to an estate plan than a living trust. They think the living trust IS the estate plan. I explain that the living trust is the main tool of many estate plans, but there are many other tools in the estate planning toolbox. One of the most common tools is the "pour over will" that accompanies the living trust.
Clients ask, "Why do I need this will if I have a trust?" Well, the will is a special kind of will known as a "pour over will." The primary purpose of this kind of will is to serve as a back up to your living trust. If one or more assets are not in the name of your living trust, then probate might be necessary. Probate is the legal process by which the court supervises the transfer of assets. During the probate process, the judge will want to see the will because it simply tells the judge where you want your assets to go. If you have a "pour over will," then your will essentially directs the judge to "pour" all your probate assets into your trust. In other words, your will basically states, "Judge, if I forgot to put one or more of my assets into my trust, please do so." Therefore, if you have a living trust, you will need a pour over will as a back up.
If you want to learn more about estate planning and the legal tools available to protect your family, call (661) 414-7100 to schedule a consultation.
A client recently came to my office to help him with his mother's estate. She passed away earlier this year, and he was trying to distribute all the assets according to her living trust's instructions.
During the distribution of the estate, my client discovered his mother got a "reverse mortgage" on her house about 3 years ago. In order to facilitate the loan, the lending company took the house OUT of my client's trust and put it into her name alone. Some lending institutions still insist on doing things this way. I'm not sure why some lenders are more sophisticated than others, but some insist on doing things the "old fashioned" way.
So what did they do? After they put the home in her name and got the reverse mortgage in place (and presumably got their fees), they left the home OUT of the trust. When she died, the house was only in her name, thereby forcing the family to go to court. If the house had been titled in the name of the trust (as it should have been), my client's family would have been able to avoid the probate court system altogether.
So what is the lesson learned? If you are entertaining a refinance, or you are in the middle of one, make sure your lender doesn't leave you out in the cold.
If they are going to start the job, they should also FINISH the job and put your real estate BACK into your living trust.