We spend quite a bit of time counseling our trust clients on the importance of “funding” their trusts. Funding is the process of retitling assets into the name of the trust or coordinating pay on death accounts. Funding is particularly important for clients who own out-of-state real estate. Sometimes our clients simply forget that they have the property and sometimes they do not think that it is worth enough to bother. As part of the funding process, we collaborate with out-of-state attorneys to assist in retitling out-of-state assets into trusts. The typical cost is in the $250 range. We offer the same service to out-of-state attorneys whose clients have Arizona real estate.
Here is a real life example of what can happen when out-of-state property is not titled in the trust. A woman, surviving spouse, came to see us about the death of her husband. The couple did have a living trust, the form store variety, and they were never advised about funding. The husband owned a one third interest in real estate in Florida. The title to that property was never changed. The property was in escrow at the time of the husband’s death and scheduled to close in September. The surviving spouse was frantic about what to do.
We had to reach out to Florida counsel to assist in a probate proceeding. The husband’s one third interest could only be transferred by a personal representative, known as an executor in Florida. That appointment is made in a probate proceeding. The Florida attorney’s initial fee quotation was $3,000 plus costs. We were able to reduce that amount utilizing an abbreviated Florida probate procedure, but even at that the fee is going to be in the $1,500 range. Furthermore, it is going to be a rush to get the personal representative appointed so that the escrow can close. The escrow is at risk at this time.
If the property had been retitled into the joint trust, for the $250 fee, upon the husband’s death the wife, as the sole acting trustee, could have immediately participated in the sale of the real estate and escrow would close without a hitch.
This is a true life example of why it is so important to get all of the assets funded in the trust!