The Question: What, if anything, can be done if someone created a trust but failed to transfer any assets into the trust? My father intended to transfer his house and the funds in his brokerage account into his revocable trust to avoid probate and a possible Will contest by my brother. Unfortunately, my father never signed the necessary paperwork to put his assets into his trust. He now lacks the capacity to do so. I am named as a trustee in the trust and am the sole beneficiary of the trust after my father passes. Can I transfer my father’s assets into his trust for him?

The Answer: Generally, the individual who creates the trust, often referred to as the grantor, is the one who is responsible for transferring assets into the trust. Even though you are a named trustee of the trust, if an asset is not already in the trust, you do not have any authority over that asset. In other words, as trustee, you cannot sign a deed transferring your father’s house into the trust. However, you may be able to transfer your father’s assets into the trust if your father signed a power of attorney naming you as his agent and giving you the requisite authority.

How it Works: Although many individuals have a revocable trust as part of their estate plan, these same individuals frequently own assets outright at the time of their death. While this may be intentional, more often than not it is because the grantor, like your father, simply never completed the necessary paperwork. Even though the trust does not give you the authority to transfer your father’s assets into the trust, as your father’s agent under his power of attorney, you may have the authority to put your father’s assets into the trust. If your father delegated to you in his power of attorney the authority to handle real estate transactions, to handle his accounts and to create and/or modify his trust, you should be able to transfer his house to the trust by executing a deed on your father’s behalf. You should also be able to retitle your father’s brokerage account so that the funds become trust assets that will pass to you upon your father’s death pursuant to the terms of the trust.

If your father did not execute a power of attorney naming you as his agent, you cannot transfer his assets into the trust during his lifetime. However, if your father executed a pour-over will when he created his trust, a lifetime transfer may not be necessary. Pour-over wills are drafted to insure that any assets owned outright by a grantor at the time of his death pass pursuant to the terms of the grantor’s trust. To achieve this result, the pour-over will essentially directs the executor to transfer all of the grantor’s assets into the trust before distributing them in accordance with the trust provisions. If your father has a pour-over will, upon his death his house and brokerage account will be transferred to his trust. As the sole beneficiary under the trust, those assets will eventually pass to you.

If your father does not have a will, and he failed to transfer any of his assets into his trust, the terms of the trust will not control how his assets are distributed after his death. Rather, the New York intestacy statute will dictate who will inherit your father’s estate and what percentage of the estate will pass to each beneficiary. If your mother or any of your siblings survive your father, they will receive shares of his estate in accordance with the law. Unfortunately for you and your father, the wishes he had memorialized in his trust will not be honored and you will not be the sole beneficiary of your father’s estate. This result underscores the importance of periodically reviewing your estate plan to insure that everything is in order.

This article first appeared in the May 26, 2011 issue of the Times Beacon Record Newspapers.
Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.