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Does Your Personal Property Belong to Your Living Trust?

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Personal property list

JULY 21, 2014 VOLUME 21 NUMBER 26

When you create a revocable living trust, you usually want to transfer most (maybe even all) of your assets to the trust — especially if one of the reasons for creating the trust is to avoid the probate process. A new deed to your home, a change in titling of your brokerage and bank accounts, perhaps even a new title for your car or cars are often part of the process. But what about your household possessions — furniture, art hanging on the wall, your priceless collection of antique tape dispensers, your stamp and coin collections?

Commonly (but not always) people who establish a living trust might also sign a document purporting to transfer all of their personal property to the trust. Usually this is not much of an issue, since there are no title documents for most of your personal effects, and your intended beneficiaries can just collect, disperse and/or sell the contents of your house.

But another purpose in executing a living trust is usually to reduce the possibilities for disputes among your family members. Your trust, after all, should include a comprehensive approach to your plans for distributing assets on your death. Even a well-drafted trust document, though, will not resolve all family disagreements.

Consider Cliff Cruz (not his real name). Cliff and his first wife had four children, all grown. After Cliff’s wife died in 2003, he moved to Arizona to be near some of his children — and here he met and married Geraldine.

Cliff and Geraldine took steps to arrange their estate plans. The signed a revocable living trust agreement, providing that on the death of either spouse the trust would be divided into two shares — one belonging outright to the surviving spouse, and one held in trust for the benefit of the surviving spouse but ultimately distributed to the deceased spouse’s children. They explicitly agreed that everything they owned, even those things they each brought into the marriage, would be treated as community property — which meant that each of them would henceforth own a one-half interest in all of their combined assets.

The couple also signed “pourover” wills, each leaving everything they owned to the trust upon death. They signed a deed transferring their home to the trust, along with transfer documents for all their other assets. Just to be thorough, they also signed a document which said that all of their personal property — household effects, furniture, contents of their home, and anything else — also belonged to the trust.

Cliff died three years later. Five days after his death, two of his children went to the couple’s home and removed four safes, all of Cliff’s gun collection and various other items, and took them to their homes. They argued that Cliff had given his children the contents of the safes and the guns during his life — before he even met Geraldine. In the safes: almost $400,000 worth of gold and silver coins.

Geraldine sued, arguing that her step-children had essentially stolen assets belonging to her as trustee and intended to form part of the trust for her benefit. The children responded claiming the prior gift, and arguing that the trust should be modified to reflect their right to the gold coins and guns. After months of legal maneuvering, the case was tried before a jury. Geraldine pointed to the documents and testified that she understood that Cliff had transferred everything to the trust; the children testified that Cliff had purchased all of those items as investments for the children, and had given them to his children (but held on to them for safekeeping) many years before his death.

If you were on the jury, do you know what you would have decided? Before you read on, stop a moment and see if you can make up your mind, or whether you need more information. If you need more information, what do you want to know?

After a three-day trial, the jury returned a verdict that two of Cliff’s four children had, indeed, taken property belonging to Geraldine and the trust. They entered a dollar verdict, rather than ordering return of the items; they therefore did not identify which items they believed were wrongfully taken. But the dollar amount of the judgment, just $15,000, made it hard to figure out what they thought belonged to the trust.

Geraldine appealed, arguing that the judgment made no sense. If the jury believed that trust property was taken by the children, she argued, then the judgment should have been more like $400,000.

The Arizona Court of Appeals disagreed. First, the appellate court noted, if there is any theory on which the jury’s verdict can be upheld, it will normally be confirmed. In this case, the fact that Cliff gave his children the combinations to the safes might have been sufficient proof of his “constructive” delivery of the coins and safe contents to the children prior to his marriage, even though he kept the safes themselves at his home. In that case, the jury verdict would make sense — and so it was affirmed. Covino v. Forrest, July 3, 2014.

What does Cliff’s estate plan tell us about good practice in other cases? For one thing, if you think you have given property to your children — or anyone else — during your life, you should make that clear. That is especially important if you still have some of the gifts in your possession. Especially in second-marriage cases, it would be really helpful if families talked about ownership and expectations early, before the death of a parent simultaneously raises the emotional level and removes an opportunity to simply ask for clarification. And, finally, just signing an assignment of personal property to your trust might not be enough, depending on your individual and family situation — you might be better served by sitting down and writing out your intentions and understanding.

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Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman

Attorney

Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson

Attorney

Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour

Attorney

Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.