Q: My mother has a trust for her house. She has recently sold the house. If she passes away is the trust valid.
will the funds need to be disbursed to the people named in the trust. The house was the only item in the trust.
A: Your mother should be putting almost all of her assets into the trust, so the assets can be distributed in accordance with the terms of the trust. If your mother passes away and has assets outside of the trust that are valued at $166,250 or more, someone in your family (maybe you!) will need to go through a year-long court process called probate. Unfortunately, no one can take their inheritance from assets that are subject to probate until the entire court process has concluded. So, it is VERY IMPORTANT that your mother put the appropriate assets in her trust. To answer your question, the trust is still valid without any assets in it, but it is not going to help anyone avoid the probate court process in most instances. Since there are some assets that do not go into standard revocable trusts, have your mother work with the lawyer who drafted her trust to learn which assets must go into her trust and which do not. Be sure she follows up with that or you may be stuck dealing with a judge and a heck of a lot of court paperwork... Best wishes.
A: Trusts and estate plans need maintenance just like a car or home. It sounds like your mom's estate plan needs some attention now that the house has been sold. A properly created trust typically remains valid even if no property is currently contained in the trust. Your mother can set up a bank account for the trust and fund the bank account with the funds from the sale of the house. If she does this, then the funds would be distributed according to the terms of the trust. Your mother can also name beneficiaries with the bank where the funds are held so that upon her passing the funds can be released to the beneficiaries. She also can name the trust as the beneficiary of the funds. These probate-avoidance mechanisms and others planning should be done under the strict supervision of an experienced estate planning attorney.
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