Trust not a cure-all for probate

It is not unusual for the estate, or at least part of it, to have to go through probate even if there is an established trust.

This happens if the trust is set up but not funded. In other words, existing assets are not transferred into the trust or new assets are not purchased in the name of the trust and, therefore, the title does not reflect the ownership by the trust.

Sometimes, assets initially transferred into the trust are taken out of the trust for some reason, like refinancing the real property. It can also happen that an asset changes slightly; for example, one account is closed and a new one is opened, but the new account is not opened in the name of the trust or transferred into the trust. Sometimes, the transfer document is ineffective. Under all of those circumstances, probate would be required.

Fortunately, sometimes it is possible to avoid probate of an asset accidently omitted from the trust if it can be proven that the decedent in fact intended for the asset to be titled in the name of the trust.

In Nevada, it is accomplished with a petition to the court to enter an order placing the asset in trust without a probate proceeding. If the trustee of the trust has a claim to property and another person holds title to it or is in possession of it, the trustee can petition the court to confirm the asset to the trust. The petition is then set for a hearing and if the court is satisfied with the evidence presented, the court orders the asset transferred to the trust without further proceedings.

The court will not automatically grant a request to transfer an omitted asset to the trust. The petitioner has to prove that the asset was intended to be in the trust. The intent can be evidenced by the fact that an asset might have initially been placed in the trust but then it was inadvertently removed from the trust for some reason, like refinancing; or a bank account initially placed in the trust was later closed and a new re-opened account was not placed in the trust. Another way of proving the grantor’s intent to place the asset in the trust may be a property schedule, also called a schedule of assets. If the asset was listed on the property schedule, even if it was not titled in the name of the trust, the grantor’s intent for the asset to be titled in the name of the trust is relatively clear.

Every set of circumstances is different and the effectiveness of a petition, as well as the strength of the evidence showing the grantor’s intent to place the asset in the name of the trust, should be evaluated on a case-by-case basis.

It is very unfortunate when the time and expense committed to create a trust and avoid probate is ineffective. While it can be mitigated with the petition described in this article and probate can be avoided, the process of trust administration is still lengthier and more expensive. Consequently, the estate plan should be regularly reviewed in order to ensure the proper funding of the trust.

Natalia Vander Laan is a Minden attorney and owner of Vander Laan Law Firm