This past Christmas, my children were given a Radio Flyer wagon by their Uncle Dan. My daughter is too young to enjoy it yet, but my 3 ½ year old son pulls it all over the place. As I watched him one day as he proudly trotted around pulling his stuffed animals in his wagon, it dawned a me: a trust is a little red wagon.
Your wagon is your rule book. Did you have a wagon growing up? What went in your little red wagon? Maybe your stuffed animals. Your stuff. Whatever you wanted. Where did the little red wagon go? Wherever you wanted it to go. When you were done playing with it, who got to play with it? Whoever you said. This is a trust! The trust dictates what goes in it, it says where it gets to go, and it says who gets to play with it if you die or become disabled. If you’ve named your spouse, then he or she can pick up the handle. Does he or she need to call the court? No, because the trust says that when you go down, she picks up the handle. She can do with it anything that you have allowed her to do, because you have already written your rules into the trust.
Just because you have created a great trust does not mean that you are all set. You may have a house, a car, and a brokerage account, and you own them all in your own name. So, you’re going through life pulling the wagon behind you and you die or become disabled – what hits the ground? All your stuff, because you didn’t put it in your wagon. How does someone pick it up for you? If you are disabled but still alive, then maybe your power of attorney can, and what does he or she do with it? Did you write any instructions into your power of attorney, or did you just you just grant blanket authority with no instructions? What if you hit the ground and you die, then how does all of your stuff get picked up? The family must go to court either to file a probate case or petition for it to be put inside the trust (in California called a Heggstad petition, which is a petition filed under Probate Code Section 850).
To avoid this, you must take things out of your own name and put them into the trust. This is called integration. Instead of Mary Smith owning everything, the owner becomes “Mary J. Smith, trustee of the MJS revocable trust”, or “Mary J. Smith, trustee of the MJS irrevocable trust”.
Now, if you fall and die or become disabled, everything is safe in the wagon because your successor trustee will pick up the handle and carry out the terms of the trust as you have directed.