Forgotten Assets Commonly Omitted from Trust funding

Having been an estate planning attorney for over 20 years I have come up with a short list of the forgotten assets that are most commonly omitted from trust funding.  That is, these assets are frequently found after death titled in individual name rather than the trust. In some cases they can be cleared up  by small estate affidavit, under $150,000 probate successions, Heggstad petitions and in some cases full probates.  However, it’s important to realize that in any of the above examples there are unnecessary attorney fees being spent. Our job is to help you avoid that unnecessary fees!  So, without further adieu, here are some assets we commonly find after death having been omitted (accidentally for the most part) from trusts.

LOANS – By far the most commonly omitted from trusts are loans. Even when secured by a deed of trust. People loan money and do not seem to put them into their trust. To clarify I am talking about when you loan money to someone else so it’s an asset and not an obligation. The promissory note and deed of trust should be payable to the trust and not to you as an individual. I bet 50% of people with notes have them in their name and not their trust name.

BONDS – People have EE, HH, and other governmental bonds sitting in their safes or safe deposit boxes. A large percentage are in their names rather than their trust names.  Before I go on, let me say that if they are small in value maybe it’s easier to cash them out. However, if larger value then get them changed into your trust name. You will need to fill out governmental forms to make that happen but I would say it’s worth it!

STOCK CERTIFICATES – People still have stock certificates in their safes or safe deposit boxes. Sometimes large numbers of shares but more often small numbers.  Stocks they received as gifts, as an employee bonus, or they liked holding the paper. In any event, I often see these in individual names rather than owned by a trust. If they are commonly traded securities you might put them into your brokerage account for simplicity!

BUSINESS INTERESTS –  Many people own a percentage of a small business. Maybe an LLC, a corporation, an “S-Corp,” a partnership or even a sole proprietorship. You should have the business records updated to reflect your trust ownership. At a bare minimum you should sign an assignment of the business interests to your trust. If the value is low it’s not a big deal but if the value exceeds $150,000 it will require a full probate to legally transfer the assets to a trust.

TIMESHARES – I understand that you had a couple mai tais when you bought the timeshare so maybe you forgot about your trust. However, eventually you remember you have a trust, right!?  I almost have to fight some clients to put their timeshare into their trust. “It’s not worth enough to worry about” is what I always hear. Ya, it might not be worth anything but it will be a headache for your kids after you are incapacitated or dead. Put it in your trust now!

There are other assets omitted from trusts all the time but the above are ones people don’t think about for some reason. They forgot about their trust with these assets. Don’t be that guy! Get it done right and get everything into your trust.


Timeshares are liabilities that keep on going from generation to generation

Let me start by saying that I love timeshares. I enjoy staying at timeshares on vacations. You can meet many friendly people while BBQing your dinner, sitting by the pool, playing ping pong, or at some of the organized activities.  I also think they are fascinating from a business perspective. I like reading about the exchanges between timeshare salespeople (who seem to trump used car salesmen for stories) and innocent vacationers.  This post is not to bash on timeshares but is merely a reminder of some things to think about when you are buying a timeshare.

Yes, a timeshare is an asset. In fact, just as the salesperson told you, it can be willed to your kids or other loved ones. I try to always ask clients about any timeshares they own when going through my estate planning questionnaire. I want to make sure to include it in their plan.

Owning a timeshare in a trust is important to make things easy on your loved ones. This is especially true for out of state real property (“deeded”) timeshares. If you live in California and own a deeded timeshare in Hawaii, Nevada or elsewhere you should be sure to put your timeshare into your living trust. This can be a huge problem after death!

However, today’s blog post is not focused on the asset planning side of timeshares. I want to talk about the side that the salesperson probably didn’t tell you as you sat on the patio overlooking the might Pacific ocean. They told you it’s an asset that can be willed to your kids. Did they tell you it’s a LIABILITY that can attach to your estate like a leech and never let go?

Maintenance fees or “MF’s” to timeshare experts are not talked about at great length during the typical timeshare sales presentation. Yes, it’s mentioned but it’s not mentioned that those MFs keep going, after you die, like the energizer bunny!  They keep piling up until someone does something, legally, to stop it.

Your timeshare is actually a CONTRACTUAL OBLIGATION. It’s a contractual obligation where you agree to keep paying MFs until the end of time. The problem for your family is they can’t just disclaim the timeshare because the liability is still there. The liability attaches to your estate. A timeshare company could literally open probate, as a creditor, and suck assets out of your estate. If there are no probate assets it can get a judgement and go after trust assets. In some cases it can get a judgement and go after individuals who received assets from you at death.

I am not saying your family will have this happen but they can.  Many timeshare companies will except the deed back, after death, and not go after the estate. However, that’s not a guarantee.

This problem is compounded when the timeshare is not in a trust. It’s compounded because your loved ones have to somehow clear title and this often means probate Court. In a case where the timeshare is in another state this can mean a multi-state probate. This means BIG MONEY!  This often means spending much more money on the probate than the timeshare is worth just so your kids can give the timeshare back to the timeshare company or sell it (or give it) to someone else it.

If you have a trust then talk to your attorney about getting your timeshare into it. If you don’t have a living trust, and are in California, contact me to get one set up!  -John

Timeshares and estate planning

Client’s often ignore their timeshare. They typically cost much more than they are worth but you should not ignore them when doing your planning. Failing to properly plan for your timeshare can leave your loved ones with a big pain in the neck… in addition to the ongoing maintenance fees!

I deal with dozens of probate and trust administration cases per year. That is, cleaning up affairs after death. Cases with timeshares often have extra headaches.

Do not ignore your timeshare. If you have a living trust transfer the title to your trust. This often costs extra money (especially in states like Hawaii) but it’s worth it!

Talk to me about planning for timeshares or cleaning up after the fact. -John

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10.0John Bernard Palley
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