By: James B. Aird
Nobody likes going to the DMV (now Driver and Vehicle Services or DVS), but if you have made a revocable trust the centerpiece of your estate planning, a trip to the DMV might be necessary to ensure your trust is properly funded and avoids probate.
Many estate planning clients list one of their goals as “avoiding the probate process” in court. One key estate planning tool to accomplish that goal is a revocable trust. However, one major challenge with utilizing any trust as part of an estate plan is making sure it is, will be, or remains “funded.”
A deceased person’s (a “decedent’s”) probate estate includes all assets that do not pass by title or contract. For example, if a decedent titles an asset “as joint tenants” with another person, the asset passes by right of survivorship to the other joint tenant and usually is not a “probate asset.” Similarly, if a decedent designates a beneficiary in a contract (such as life insurance), that beneficiary unusually inherits that asset without the asset passing through the probate process in court. Everything else is the “probate estate” and usually must go through probate in court to be distributed to heirs at law or devisees named in a will.
Probate can still be avoided if the “probate estate” is kept sufficiently small. In Minnesota, Minn. Stat. § 524.3-1201 allows a person claiming to be a successor of the decedent to “collect” personal property (including cars and other vehicles) without need for probate, provided, among other things, that the probate estate does not exceed $75,000 in gross value. In Wisconsin, Wis. Stat. § 867.03 allows for certain transfers to be made “by affidavit”, by an heir, trustee, nominated personal representative, or guardian, thereby avoiding the probate process, similarly provided the probate estate does not exceed $50,000 in gross value.
Using a revocable trust to avoid probate aims to ensure that all “probate assets” instead pass by contract – the operative contract being the Trust itself. A trust that never gets “funded” with assets is an empty “bucket” that just cost the decedent legal expense but did not accomplish the goal of avoiding the probate process. Some clients set up a trust, fund it properly, but over time fail to stay vigilant as they acquire new assets and circumstances change.
