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Nolan Elder Law and Estate Planning, LLC Blog

Monday, September 11, 2017

Should I Transfer All of my Assets Into My Living Trust?

A trust is similar to a will in that it disposes of your assets after your death, but there are significant differences between a living trust and a will. With a will, you still own all your property as long as you are alive. That is not the case with a trust. If you have set up a living trust, you might wonder, if talking with a trusts and estate-planning lawyer is a good idea. The answer is a resounding, “Yes.”

Some people make the mistake of going to the expense and bother of making a living trust, but they never actually transfer their property into the trust. This makes the trust pretty much useless. Since a “pour-over” will was likely also prepared to go along with your trust, the probate court will distribute all your assets according to the terms of the pour-over will.

Common Mistake People Make When Setting up a Living Trust

All the property you want distributed according to the terms of the trust must be transferred or re-titled, from you to your trust. For example, Lori Miller would re-title her house, the car, the bank accounts, and all of her other property from Lori Miller to “The Living Trust of Lori Miller.” Until you change the titles or other ownership documents on your property, it is not part of your trust, regardless of whether you mention it in the trust. The trust is a separate legal entity from you, and the trust cannot distribute your assets. The trust can only distribute the assets it owns.

If you have transferred your property to your living trust, you need to remember to update your trust if you sell or other otherwise dispose of property in the trust. The terms of the trust will control what you are allowed to do with the property once it is in the trust. When you acquire new property, you should update your trust and be sure to title your new property in the name of the trust. People often forget to do this, and the property they buy or receive by gift or inheritance after they set up the living trust is not part of the living trust.

The Rules are Different in Alabama

Alabama is different from general law when it comes to insurance policies and living trusts. In other states, you cannot make a living trust a beneficiary of an insurance policy, but Alabama law does allow you to do this. Because of this unique law in Alabama, you do not have to re-title your insurance policies, but you need to make sure you list your living trust as the beneficiary.

If you have a will, you can change your mind about your property distribution multiple times by simply changing your will. With a living trust, you may or may not be allowed to make changes. If your trust is a revocable living trust, you can make changes, but you cannot alter an irrevocable living trust.

Although it can create some work for you to set up a living trust, having one can save your loved ones the expense and slow process of going through Alabama’s complicated probate process. Alabama does not follow the Uniform Probate Code, so some of our procedures are long and complex.

The laws are constantly changing, so you should talk with a local Alabama estate planning attorney to develop strategies to best protect your parents from predatory housing schemes.

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