Q: We provided our investment adviser with a copy of our trust. He asked for a copy of our wills also. We told him we didn't have wills because we have a trust, but he insisted that we should also have wills. Is he right?
A: I think one of two things is happening. Either your investment adviser knows nothing about estate planning or he knows a lot. Either way, he's not wrong. Having a trust does not mean that you shouldn't also have wills.
Someone with very little understanding of estate planning may not know that trusts offer testamentary benefits. In other words, that a trust can transfer the assets of a decedent after death as effectively as a will and probably more so.
Now, obviously a person who doesn't think that trusts can offer testamentary benefits is mistaken. But not understanding that potential benefit may be one reason that the adviser requested a copy of the will.
Although not understanding what trusts can and can't do may be one reason that the adviser requested a copy of the will; I don't think it is the most likely reason. I'm guessing that the adviser at least has a basic understanding of estate planning and knows that even with an estate plan utilizing a trust you should still have a will.
Remember that trusts can only exercise control over assets that have been transferred into it. If the asset isn't a trust asset, it's unlikely that the trustee can take charge of the asset and transfer it after death.
The problem is that people who create trusts often fail to properly fund them. Sometimes it's intentional, but usually it's an oversight. Whatever the reason may be, failing to transfer the assets into the trust can create a probate asset.
If you have a probate asset, the person who receives it has to be determined. If you fail to leave a will, it's likely the asset will transfer according to the intestate statutes and not according to the trust.
To assure that the asset's distribution is determined by the trust, you need to get it into the trust. You do this by executing what is commonly referred to as a pour over will. A pour over will is the same as a regular will, only the trust is named the beneficiary. The pour over will is your safety net. If you neglect to transfer the asset into the trust, the pour over will will get it into the trust for you.
None of this means that I think it's a good idea to provide a complete copy of the trust or will to your financial adviser, because I'm not sure that it is. However, your financial adviser may have uncovered a potential problem with your estate plan. If you have a revocable trust but no will, I'd call the attorney to find out why. I suppose it could be intentional but I'd make sure.
Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at www.nwi.com. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chrisyugolaw@gmail.com. Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.