Trust Schedules–Are They Useful?

Dear Mr. Miller:

My husband and I have a living trust.  Our apologies, we didn’t get it from you–probably should have as you seem to know your stuff.  Anyway, I was looking through the various documents and noticed that our Trust has something called schedules in back.  A Schedule A, H, and W.  There is nothing on them.

Does that mean we don’t hold anything in the Trust and we will have Probate when one of us dies?  I am getting a little upset with our attorney as it seems we paid him a godly amount of money and got nothing for it.  Can you explain?

Frustrated Client

What Do We Mean When We Use the Term “Trust”
Trust Schedules
Intent vs Legal Title
Should you use the Schedules
Did Your Attorney Screw Up
Does a Trust Do Anything Other Than Avoid Probate
What Now

Dear Frustrated:

What Do We Mean When We Use the Term “Trust?”:  I think you are getting a little ahead of yourself.  It is very possible that all is well.  First, let’s define our terms.  When a consumer talks about their Trust they usually mean all of the various documents that were created and signed, usually at the same time.  So that will include the Wills, Powers of Attorney, Trust, etc.  When an attorney talks about the Trust, the attorney is focusing on that single document, usually called the Family Trust, Intervivos Trust, or Living Trust.  I’m going to discuss this from the attorney’s perspective, i.e. the Family Trust.

Trust Schedules:  Many Trusts created by attorneys, or even off the internet, have schedules at the end of the document.  The purpose of these schedules is to indicate what is owned/held by the Trust as opposed to what you and/or your husband are continuing to own outside of the Trust title.  Schedule H is often for the husband’s separate property, W for the Wife’s separate property, and A (sometimes known as C) being property owned by both of you together.

Intent vs Legal Title:  What most people don’t understand is that you can use those schedules or not.  At the most, they indicate what you had the “intent” to title in the name of the Trust.  But, what we are going to call “legal” title is actually transferred to the Trust by going to the bank or securities broker to change title on the financial firm’s records.  Similarly, with real estate, until a deed is signed transferring title to the Trust (and maybe recorded), legal title has not been changed.  So what’s the ramification of failing to change legal title to the Trust.  Probate.  (But note that, at least in California, there is rarely a Probate to pass title from a deceased spouse to the survivor.  There are far easier procedures even if no Trust is in existence.)  So if both spouses die (not necessarily simultaneously) if legal title has been transferred to the Trust, generally, no Probate is necessary.  If legal title has not been changed, then those schedules may be of value to get title to the beneficiaries of the Trust.  A court procedure will be necessary but it won’t require a full Probate.  So the key takeaway here is that until legal title is changed, the job is not done!

Should you use the Schedules?:  The schedules can be useful as indicated above.  Also, it tends to let your successors (children) know what assets you have and where.  But each time you change from one bank to another, you need to update the schedule. Most people forget to do so.  For myself in my own private life, I don’t use the schedules on my own Trust.  I tend to keep things digitally so when I change a bank, I just update things on my computer. My children are briefed on where on my computer to find this stuff in addition to other ways to figure out what I own.

Did Your Attorney Screw Up?:  Since I wasn’t at the meetings with your attorney I don’t know what was discussed and every attorney does things somewhat differently.  In my practice, I generally handle the legal title transfer on the California real estate and instruct the client on what transfers they need to handle directly (Financial institutions).  The schedules are something that they can fill out if they wish.  We handle the “intent” issue by other means.

Does a Trust Do Anything Other Than Avoid Probate?: A Trust can accomplish a lot of different purposes, not just Probate avoidance.  Take a look at this Frequently Asked Questions to delve into that topic a bit more.

What Now?:  So how do you find out if your attorney screwed up?  Well, you can certainly call him and ask him questions about the situation.  Or you can call us for a review.  We do reviews all the time for those whom we created Trusts and for those who we have not yet created a Trust.  Call 760-436-8832.