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August 2018
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Trust Lawyers Explain What Happens to Assets Not in Trust
by Gerald M. Dorn, J.D., EPLS, AEP
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Gerald Dorn
Gerald Dorn

Generally, when people place assets into a revocable trust it is for the purpose of avoiding the expense and delay of probate. All your assets, everything you own in your name at the time of your death, will go through the probate process. So, the objective of a trust is to transfer ownership of as many assets as possible into the trust in order to remove them from the probate process. How do you decide which assets to transfer to the trust? What happens to assets not in trust? These are questions our trust lawyers can answer.

Which assets do you transfer?

As the person creating the trust, you decide which assets will be transferred and which will not. It is entirely up to you. Some individuals transfer everything they own into their trust. Others transfer nearly everything. It is not necessary to transfer every single asset. Those items that you choose to leave out can be handled with what is known as a “pour-over” will. So, how do you determine what to keep in and what to leave out?

Some of the most common assets that people transfer to their living trust include the following:

Generally speaking, the so-called “big ticket” items are typically placed into trust. Since not everything you own needs to be placed into the trust, what happens to those items that are left out? Our trust lawyers have the answer.

What happens to assets not in trust?

What happens to assets not titled in the trust at death depends on the nature and value of the property. Under Nevada law, if the only assets left out of the trust are personal property, and the value of the property, excluding the value of any motor vehicles, is $25,000 or less (or $100,000 or less of the beneficiary entitled to the property is a surviving spouse), the property can be transferred outside of probate by way of a simple affidavit procedure. If the assets left outside the trust include real property and/or personal property not exceeding $100,000, the property can be set aside for the beneficiaries outside of probate with a single petition to the probate court. If the value of the assets left outside of the trust exceed $100,000, a probate administration is necessary.

Ancillary probate may be required in situations where you own out-of-state property that is not titled in the name of your trust. Any assets that are owned in joint tenancy with right of survivorship or by the entirety with your spouse, you can lose your estate tax exemption, as well as run the risk of disinheriting your children. If a minor child or grandchild is a co-owner or tenant with you, and that property is not included in your trust, an adult will need to initiate court proceedings to gain control through a guardianship or conservatorship.

Ultimately, the importance of funding your living trust must not be overlooked. If it is, your estate plan will not be as beneficial to your family as you may have anticipated.

family trust

Pour-Over Wills and Trusts There are a number of reasons why many individuals choose to utilize trusts as their primary vehicle of asset transfer instead of the standard last will. For one thing, trusts can provide asset protection from creditors and other claimants seeking redress from your heirs, and the creation of certain types of trusts can sometimes provide much needed estate tax efficiency. But it is probably safe to say that the most common reason why people choose to create trusts such as a revocable living trust is to transfer assets to their family members outside of the process of probate.

Avoiding probate

Probate is avoided in large part because it is time consuming and public. Your heirs will not receive their inheritances until the process of probate has run its course and the estate has been closed, and this can take anywhere from perhaps nine months to even several years in some complicated cases. Interested parties can also choose to challenge the will during the probate period, and many people would prefer to keep this avenue closed through the creation of a trust.

Another reason why people avoid probate is that it is expensive. There are fees that go along with the probate process, and these include court costs, executor fees, the trust lawyers’ remuneration, and potential accountant, appraiser, and estate liquidation fees.

The benefits of a pour-over will

Should you choose to utilize a trust as your vehicle of asset transfer you may also want to include something that is called a pour-over will. It is possible if not likely that you will have some personal property that has not been placed into the trust for one reason or another after you pass away. With a pour-over will you state that any such property is to be placed into the trust, and when you do this you tighten up your estate plan and leave nothing dangling out there subject to the rules of intestate succession.

The law firm of Anderson, Dorn & Rader, Ltd. is devoted exclusively to estate planning and estate and trust administration.

The attorneys at Anderson, Dorn & Rader, Ltd. offer guidance and advice to clients in every area of estate planning and estate and trust administration.

For more information or to attend an upcoming seminar, please contact us at (775) 823-WILL (9455), or visit us online at www.wealthcounselors.com.