Can a Deceased Person's Estate Give Property Under a Trust?

By John Cromwell

Normally, trusts are used to keep property out of an estate. Having property included in probate delays its distribution to the heirs and beneficiaries of a decedent. Placing property in trust prior to a person’s death keeps it out of this probate process. However, a person may decide to have property placed in a trust after his death for other reasons. In such a case, a deceased person’s estate may give property under a trust.

Normally, trusts are used to keep property out of an estate. Having property included in probate delays its distribution to the heirs and beneficiaries of a decedent. Placing property in trust prior to a person’s death keeps it out of this probate process. However, a person may decide to have property placed in a trust after his death for other reasons. In such a case, a deceased person’s estate may give property under a trust.

Why Create a Trust?

A trust is a legal device used to transfer property to a person or group of individuals. These people are known as beneficiaries and intended to benefit from the property. However, the property is held by a trustee who manages and distributes the property to the beneficiaries. This is done in an attempt to prevent beneficiaries from wasting trust assets or making poor investments. An example of a situation where a person may want to leave property to a person subject to a trust is if the recipient is a child.

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Testamentary Trust

If you want to leave someone property subject to a trust, you need to do so through a will. This type of bequest is known as a testamentary trust. Generally, the will transfers all of the estate to the trustee. The will establishes the beneficiaries of the trust and its terms. As long as the person who is setting up the testamentary trust is alive, he can change trustees, beneficiaries and the trust’s terms at any time.

Pour Over Will

In some cases, a person may create a trust prior to his death and place some of his property in it, while keeping the rest for himself. When that person dies, he may then want his property placed in the trust he already created. A pour-over will transfers all property the decedent owned not already bequeathed into the pre-existing trust. If for some reason the original trust is determined to be invalid, a pour-over will can provide that all of the property is to be distributed to the trust beneficiaries based on the trust terms. By doing this, the purpose of the trust can be fulfilled using the valid will.

No Contest Clause

Some beneficiaries of the will and trust may argue that they should get the property outright. A no-contest clause is a means to deter beneficiaries from disputing the will and resulting trust. If a beneficiary challenges a will or trust that has this clause, he loses all rights and benefits to the property.

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Is a Living Trust Liable or Subject to Probate?

References

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