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Home Special Sections Wealth Management

FUNDING A REVOCABLE TRUST IS CRITICAL, BUT OFTEN FORGOTTEN

December 5, 2017
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As part of the estate-planning process, many people create revocable (aka living) trusts. Trusts can be used to avoid probate, but only if they are funded before you pass away. Funding a trust is an oft-forgotten step in the estate-planning process. If not done correctly or at all, then many of the purposes and expected benefits for which the trust was created could be lost. Chief among those is that avoiding probate may not be accomplished. Worse yet, your ultimate distribution plan may conflict.
To fund a trust, your assets need to be transferred to the trust. Accounts and real estate deeds need to be re-titled to the trust and tangible personal property needs to be assigned to the trust.
Retirement accounts such as IRAs and 401(k)s cannot be in the name of the trust, but the trust can be a beneficiary of retirement accounts. To do so, however, the trust must be drafted carefully to comply with IRS tax regulations. Then, the trust can be listed as the primary or contingent beneficiary on a beneficiary designation form for the account.
In addition to problems caused by not funding your trust, your overall distribution can be frustrated if your trust conflicts with your beneficiary designations on your life insurance and bank, retirement and investment accounts.
For example, what happens if your trust leaves everything to your children equally, but the life insurance beneficiary designation only names one of your children? Under Arizona law, what’s on the beneficiary designation controls. So, in this example, the child named on the life insurance beneficiary designation would get all of it. The same goes for anything with a beneficiary or transfer-on-death designation, such as bank accounts, retirement accounts, investment accounts, etc.
Similar conflicts can occur with real estate that is not titled (deeded) to the trust. Many buy their homes or other property and take title with their spouse as joint tenants or community property with right of survivorship. The ROS designation allows the property to pass to the surviving spouse without going through probate. When the first spouse passes, some add a child to the deed as joint tenants with ROS, with the thought that this child will then sell the property at the parent’s death and divide it among all the siblings, which is what the trust says should happen.
Unfortunately, the parent’s wishes may not be accomplished in this scenario. The ROS designation on the deed means that the one child inherits the property as his or her own and has no legal obligation to follow the terms of the trust.
Coordinating the funding of your trust with your overall estate-distribution plan needs to be done with care. Your estate-planning lawyer can only advise you properly if you give him or her the big picture, i.e., full disclosure of all of your assets along with copies of deeds, titles and beneficiary designations.

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OUT & ABOUT — Thank you to Janet Cameron, Karen Shaw, and Janet Ash for submitting these creative photos! Reader photos are published in every issue of Prescott LIVING - send in your best shots taken in the Greater Prescott area to photos@roxco.com. Selected photos will appear in print and will be posted to our social media channels. #prescott #prescottvalley #chinovalleyaz #deweyhumboldt ... See MoreSee Less

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Tickets are available at www.ycpac.com for the Kathy Mattea & Suzy Bogguss concert, which is coming up on March 2 at the Yavapai College Performing Arts Center. If you're not familiar with their musical careers, here's some background from YCPAC. . . .COUNTRY STARS COMBINE HIT SONGS AND CHEMISTRYPrescott, Arizona (2/2/2023) – Two stars, no waiting. When longtime friends and Country music artists combine their impressive set lists and their love of live performance, everybody in the audience wins. Yavapai College Performing Arts Center invites you to join Country music hitmakers Kathy Mattea & Suzy Bogguss for a rousing and memorable ‘Together at Last’ performance, Thursday night, March 2 at 7 p.m. Two country music legends, with three Grammy awards between them, bring their prodigious talents, their solo hits, and their on-stage chemistry to the stage in ‘Together at Last.’ Friends since their early days in Nashville, Kathy Mattea and Suzy Bogguss have each carved out careers in popular music with country chart hits spanning two decades. Kathy has had more than 30 singles in Billboard Magazine’s Hot Country Songs Charts, including “Goin’ Gone,” “Eighteen Wheels and a Dozen Roses,” and “Come From the Heart.” She won Grammy Awards for her 1990 single “Where’ve You Been?” and her 1993 Christmas Album Good News. Bogguss found stardom with her platinum-selling album Aces, which featured four hit singles: the title track, “Someday Soon,” “Outbound Plane,” and “Letting Go.” She won the Academy of Country Music’s Top New Female Singer award in 1989 and the Country Music Association’s Horizon Award in 1992. Their busy solo careers allowed Kathy and Suzy few opportunities to collaborate musically, although they did perform a Grammy-nominated cover of “Teach Your Children” back in 1994. Their fans have clamored for a joint tour like this for years. And now, sporting new material developed for the tour, armed with two careers worth of stories and more hits than they can fit, Kathy Mattea and Suzy Bogguss are together at last.Tickets for Kathy Mattea and Suzy Bogguss start at $32. Yavapai College Performing Arts Center is located at 1100 E. Sheldon Street, in Prescott. The YCPAC Ticket Office is open Tuesdays and Wednesdays, from 9 a.m. – 6 p.m.; and Thursdays and Fridays, from 9 a.m. - 4 p.m. For reservations or more information, please call: (928) 776.2000 or visit us online at: www.ycpac.com.. . .Be sure to pick up a free copy of Prescott NOW to see what's happening this month, or visit prescott-now.com/events for the online events calendar. ... See MoreSee Less

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