The Kenwood Press
: 03/01/2014

Trusts and Probate



Dear Len & Rosie,

Mother has passed away and my sisters and I are her co-executors and co-trustees. We were told by the bank that we are unable to open an estate account to access any of her funds unless we put the estate in probate. Why did we have to have a trust if the estate still has to go through probate? When my mother made her trust she was assured that there would be no probate and that she wouldnít put her children through what she went through when my father died. Are there any banks that will honor the will and trust as she made them?

I donít want to ask her attorney because it costs so much. Where are my civil liberties if no matter what mother wanted done with her hard earned money, the court gets to make the final ruling? Why are lawyers telling people to set up living wills and trusts if they do not protect our personal rights?

Mimi

Dear Mimi,

It is difficult to say what went wrong without reviewing in detail your motherís trust, the assets she owned upon her death, and how these assets are titled. If the bank is saying that a probate is necessary, what must have happened was that your mother failed to fully fund her trust with her assets. Both she, and you, are likely victims of the ďLiving Trust Myth.Ē

The Living Trust Myth, perpetrated by trust mills and some lawyers who donít do such a good job in advising their clients, comes down to this: ďNow that I have a trust, everything will go to my children automatically when I die, and it will all be for free.Ē This cannot be further from the truth. Creating a trust to avoid probate is usually a very good idea. It is easier, cheaper, and less time-consuming to administer a trust than it is to probate an estate in court. However, trusts are not automatic. They have to be properly funded and administered in order to work.

Your mother may not have retitled her accounts into the name of the trust. Anything titled solely in her name upon her death belongs to her probate estate, not her trust. If these assets are worth less than $150,000, then probate isnít necessary and you can collect her estate using small estate declarations prepared by an attorney or using a form supplied by the bank (not all banks do this). Also, if the assets in your motherís estate are listed on the schedule of trust assets in the back of her trust, itís possible to obtain a court order declaring these assets to be in the trust without having to go through probate.

You need to consult with a trust and estates attorney to review your motherís estate and figure out what you need to do to straighten this out. It is going to cost money, but it is the only way that you and your sisters are going to be able to distribute your motherís assets.

The laws regarding probate and trusts exist not to thwart your civil liberties, but to protect the rights of each of us, including your mother, to pass our assets on to our chosen beneficiaries upon our deaths. Without the law, the guy down the street who shows up first with the biggest truck gets everything. Even though you do not want to deal with any attorneys (except us), you and your sisters need help.

Len & Rosie




Dear Len & Rosie,

My parents are in their 60s and had the idea of putting my sister or me on their checking accounts to be able to write checks and take care of their accounts if something should happen to them. My concern is that if my name is on their accounts, and I was to be sued for some reason and they go after all my assets, they could go after my parentsí accounts too. How can I protect my parentsí money if they were to put my name on their accounts? I would sure hate for something that happened to me to cause them to lose all their money just because Iím looking out for them.

Tim

Dear Tim,

Your parents have a good idea. You do not have to worry about your creditors going after their money. If they put you on their checking account as someone who can sign checks with the bankís own power of attorney forms, the money is not yours and is not subject to the claims of your creditors.

Even if your parents add you and your sister to their accounts as joint tenants, the money will still be protected. Under California law, money in a joint tenancy account belongs to the person who put the money into the account, and is not actually owned equally among the joint tenants, although each of them have legal access to the money.

Even if your parents have a trust, it is frequently a good idea for them to put a family member or loved one their day-to-day checking account, rather than putting that account into the trust. The reason is that even though a trust names successor trustees to take over the management of the trust if the initial trustees become incapacitated, transferring the trust assets to the new trustees is not an automatic process. You would first have to obtain death certificates or letters from doctors stating that your parents are incapacitated. That can take weeks. Then you have to visit the lawyer to have the paperwork prepared, and then you have to come back to sign it. After that, you can get your name added to your parentsí trust accounts at the bank. The whole process could take a month or two. If you are on the checking accounts now, youíll have immediate access to enough money to pay their day-to-day bills.

Your parents should not rely on their durable general powers of attorney to enable you to write checks on their bank accounts if they become incapacitated. Banks are notorious for refusing to respect the validity of perfectly good powers of attorney, even though they are required to do so under the law. Youíll have an easier time taking care of your parents when they need help if they put you on their checking accounts now.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at www.lentillem.com.