If an account is not in the name of the living trust or if the trust is not named as beneficiary on death, probate will be necessary for the beneficiaries to access the account.

Many people now are using revocable living trusts as the basis of their estate plans. They do this because they want to save their families the time expense of going through probate.

A living trust needs to be “funded” to avoid probate. Funding means that assets are transferred to the living trust during life so that the trust owns the assets. Assets may also name the trust as beneficiary on death so that the asset passes directly to the living trust when the trust creator dies. If an asset is in the name of the living trust or designates the living trust as beneficiary, probate will not be necessary for that asset to be transferred quickly and efficiently to the beneficiaries.

But many are missing a step that will mean the difference between success and partial failure in accomplishing their goals. That step is making sure that all financial accounts are either in the name of the living trust or designate the living trust as beneficiary on death.

This week, we encountered several situations where we discovered that, while most of the deceased person’s assets were properly transferred to the deceased person’s living trust, one or two small accounts were lacking beneficiary designations.

Some of these small accounts are easy to miss. Perhaps there is a checking account for buying groceries and paying day-to day bills, and no thought is given to how important it is to add a beneficiary designation to that account. Because the accounts are small, they are liable to slip through the cracks when the trust funding happens.

Unfortunately, if there is no beneficiary designation and the account is not jointly held with another person (with right of survivorship), probate will be necessary for the beneficiaries to receive the funds in the account. This is the case even if there is just a nominal amount in the account. The fact that there is very little in the account does not affect the steps that have to be taken to access the account; and those steps involve a probate proceeding which could cost thousands of dollars.

If you have a living trust, take the time periodically to check to make sure that all of your accounts and other assets are either in the name of your living trust or designate your living trust as beneficiary on your death. If you own an account with another person with right of survivorship, you can designate the living trust as a beneficiary on the death of the survivor on the account.

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