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Assets, Wills, Businesses, and Estates

The Black Hole Revocable Trust

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black holeSurprise! Have a Revocable Trust (a/k/a “Living Trust’)? Gotten any statements addressed to it? No? Well, the Trust isn’t going to do what you think it will do.

It’s like buying a car with no gas in the tank. You’re not going anywhere.

And we see this all too often.

(This is no knock on these Trusts; they can be very useful.  But if they’ve got nothing in them but dust, the signed document is next to useless.)

A typical story: a couple fills in a “Trust” form given to them by their banker.  It looks legal and official enough: the print was really small, the right margin was justified, and the signature block looked very important.

They figure the customer service person at the bank must have known what he or she was doing, the bank’s logo was on the top, and sure, this was cheaper than going to a lawyer, so what was the harm?

The bank person assures them that it’s a fine trust; “that’s why the Bank gives these out.”

So they sign, and take a copy home to put with their important papers.

Fast forward: one spouse becomes incompetent.  The other one goes to the Bank. The manager at that time says “Well, sure, you did sign this Trust, but there’s nothing in any Trust account — no assets, no stocks, no money. So there’s nothing we can do, and nothing you can access.

In other words, the bag you created has nothing in it.  So it’s not going to let you get to any assets.

If the Trust signer is alive, you’ll have to use a Financial Power of Attorney to get his or her assets into the Trust . . . though it’s questionable why you’d want to, at this late point.

And if the Trust signer is dead, you’ll have to probate the Will to get assets into the Trust. You may not want to, but you may have no choice. (If it’s a “pour over” Will, the estate assets can’t go anywhere except into the Trust.)

Worse, if there’s no Will, just this empty Trust, then you’ll be stuck doing an “administration” and your assets will go where Georgia says they do – not where you do.

All the commentators, pundits, columnists, accountants, lawyers-of-all-trades-who-are-masters, etc., and other well-meaning folk only give half the story. “The Revocable Trust is a panacea,” they proclaim, “A universal remedy!”  Except, it isn’t.

Worse, lots of form Revocable Trusts are self-serving and self-limiting. ‘This Power of Attorney covers all my accounts at [this financial institution].”  It says nothing about it applying to all assets everywhere else – which it should, and could, so easily.

Then there’s all that preprinted boilerplate.  An off-the-shelf or out-of-the Internet Revocable Trust form is not going to deal with the balancing you’ve decided on between the children of the first marriage and the spouse in the second marriage.  A fill-in-the-blank form is not going to deal with the problem of how to deal with particular children, their spouses, special needs, etc.

Now sure, you’d think the solution is having a proper Will, since probating a Will in Georgia is usually easy and inexpensive.  Doesn’t a “Pour Over Will” (that pours any non-trust assets into the Revocable Trust) save the day?

There’s a double-whammy here. First, if there’s been nothing in the Revocable Trust, would you really want the Trust terms to control? Also, you may have no choice: what if the Pour Over Will is vintage, and does not leave anything to spouse, children, or others.  They may be stuck by the Trust’s terms.

The short answers: If you have a Revocable Trust or Living Trust, best to check out what’s in it before you, your spouse and your children get a nasty surprise.  And if you don’t have one but still want one, don’t sign anything  that could have come from a vending machine.

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