The most common estate planning mistake in Oregon, by a distance
A living trust that was drafted but never funded does almost nothing. Here is how to tell whether yours was, in about ten minutes.
Roughly a third of the estate plans families bring us for review have the same defect. The trust exists, the binder is handsome, and the house is not in it.
What a trust actually is
A revocable living trust is a container. Signing the trust document creates an empty container. It does nothing on its own; it only controls the assets that have actually been put inside it, and putting them inside is a separate act called funding.
For a house, funding means recording a new deed transferring title from you personally to you as trustee. For a bank account, it means retitling the account. For a retirement account, it means, usually, nothing at all, because those pass by beneficiary designation and generally should not go into a trust.
Why the unfunded trust is so common
Because the drafting is the part that gets billed and the funding is the part that gets left for later. A firm sends you a binder and a friendly note saying you will need to transfer the house. You mean to. It is January. It is a Tuesday. Twelve years pass.
The result is an estate that goes through exactly the probate the trust was purchased to avoid, plus the cost of the trust.
Check yours in ten minutes
- Find your most recent recorded deed. In Multnomah County you can search it online through the county recorder, free.
- Read the grantee line. It should say something close to "Jane Ellen Okonkwo, Trustee of the Okonkwo Family Trust dated March 4, 2019."
- If it says only "Jane Ellen Okonkwo", the house is not in the trust.
- Then check your bank and brokerage statements. The account name should carry the trust name too.
- Then check the beneficiary designations on your retirement accounts and life insurance. These override your will entirely, and the most common problem we see is a designation naming an ex-spouse from a marriage that ended in 2011.
The other two things people miss
The guardian nomination has gone stale. The sister you named in 2014 now lives in Atlanta and has three children of her own. This is a fifteen minute fix and almost nobody does it.
There is no power of attorney. A will governs what happens after you die. It does nothing at all if you are alive and cannot make decisions, which is statistically far more likely. Without a durable power of attorney and an advance directive, your family is filing a conservatorship petition in a courthouse during the worst month of their lives.
If you find a problem
Most of these are cheap to fix. A deed transfer into an existing trust is straightforward. A beneficiary designation update is a form. Bring us the binder and we will tell you in one meeting which parts are fine, which parts are stale and which parts never worked, and we will not pretend you need a new plan if you do not.
