Even simple estate plans can fail if the revocable trust is not properly funded, especially with all real estate owned by decedent.
If the decedent’s real estate is not properly transferred to trust, then unless there are other viable options (like an expensive Heggstad motion, for example) the real estate will likely need to be probated. Avoiding probate is usually one of the more basic estate planning goals, so that alone means the plan failed. Moreover, depending on whether their is a properly drafted pour-over will, the distribution may be other than as planned. And if the title was jointly held with a spouse or other person, a number of bad outcomes may result, including possibly even disinheritance of the kids.
The best way to transfer the real estate to trust is with a deed. But what kind of deed?
ALWAYS* use a grant deed for the transfer, NEVER a quitclaim! A grant deed carries with it limited warranties (e.g., that you have title and that the property is not subject to undisclosed encumbrances) that help to preserve marketable title and allow title insurance to clear up any defects. After-acquired title will follow a grant deed, but not a quitclaim. Quitclaims are used occasionally in other settings where a grantor wants to simply make clear they are giving up title to any interest they may have, but whenever you want to make sure title remains marketable you should use a grant deed with grant language (though it may be captioned as something else, like “Trust Transfer Deed”).
*A possible exception that comes to mind is where you took title by quitclaim. In that case, you do not want to warrant title, unless you want to rely on insurance.
Estate planning attorneys will usually get real estate transferred into trust right away when the plan documents are signed. However, lenders often require that the property be taken out of trust before they will do a refi, for example, and no one gets around to putting the property back into trust.
Sometimes a well-meaning non-attorney (such as a realtor friend or some type of financial professional) may try to help by preparing a deed for free or for less than what an attorney might charge, and quite often they will draft it as a quitclaim, not realizing the issues involved. Even some inexperienced attorneys use quitclaims for trust funding, so watch out.
Contact us right now if you have real estate outside of your trust. We will quickly and easily get the real estate into your trust with a properly drafted grant deed. We’ll even record it right away for you, electronically at our office.
