Episode 69: Why Estate Plans Fail Adult Children
Episode 69
Host: Jill Mastroianni
Why Estate Plans Fail Adult Children
Your parents paid thousands of dollars for a revocable trust but none of the assets were ever transferred into it. Did their estate planning attorney make a mistake?
In this episode of The Death Readiness Podcast, Jill Mastroianni explains what it actually means to fund a trust, why this step is essential for the plan to work, and who is typically responsible for doing it. She also walks through a real-world example showing how failing to fund a trust can cost families hundreds of thousands of dollars in probate fees and create a huge administrative burden for adult children.
More importantly, Jill highlights the hidden emotional cost when estate planning work falls on family members instead of being handled during the parent’s lifetime.
What You’ll Learn in This Episode
What “Funding a Trust” Actually Means. A trust agreement by itself does not control your assets. For the trust to work, assets must be retitled in the name of the trust. If assets remain titled in an individual’s name, they may still go through probate, even if a trust exists.
Why People Create Revocable Trusts. Revocable trusts are commonly used for two main purposes:(1) Asset Management During Life--A trust allows a successor trustee (often an adult child) to step in and help manage finances if the creator of the trust becomes ill or cognitively impaired, and (2)Avoiding Probate --Assets properly titled in a trust can pass directly to beneficiaries without going through the court-supervised probate process.
Why Trust Funding Gets Overlooked. Many families believe their estate plan is finished once the documents are signed. But drafting the estate planning documents and implementing the estate plan are two different steps. Common reasons funding doesn’t happen include: clients assume the attorney handles everything, attorneys expect the client to complete the transfers, financial institutions make the process difficult, and the administrative work simply gets postponed.
The Emotional Cost for Adult Children. Adult children often end up acting as: administrative assistants, financial coordinators, and the ones responsible for communicating with customer service representatives at banks and insurance companies, all while balancing their own work, families, and responsibilities. Good estate planning should reduce that burden, not create it.
Who Should Handle Trust Funding? Attorneys typically draft the documents, but they may not handle the administrative work of transferring every asset in the trust. Funding a trust often involves contacting financial institutions, completing transfer paperwork, updating beneficiary designations, retitling property, and coordinating insurance policies. Because this work is time-consuming, Jill recommends working with a specialist who focuses on trust funding. Jill recommends Mollie Lacher at Sunny Care Services, LLC: https://sunnycareservices.com/
Simplifying Your Financial Life. Jill also recommends simplifying financial accounts. Having assets spread across multiple institutions can make trust funding, and future management, much harder. Working with a financial advisor and consolidating accounts can help reduce administrative complexity, ensure required minimum distributions are handled correctly, and make it easier for a successor trustee or family member to step in if needed. Jill recommends Blair Martin at RW Baird: https://lexingtondt.bairdwealth.com/team/blair-c-martin
Resources & Links
Episode 38, Why You Need (or Don’t Need) a Will in the show notes: https://www.deathreadiness.com/podcast/why-you-need-or-dont-need-a-will
Episode 19, Why You Need (or Don’t Need) a Trust: https://www.deathreadiness.com/podcast/episode-19-how-to-know-if-you-need-a-trust
Mollie Lacher, Sunny Care Services, LLC: https://sunnycareservices.com/
Blair Martin, RW Baird: https://lexingtondt.bairdwealth.com/team/blair-c-martin
Connect with Jill:
Website: DeathReadiness.com
Email: jill@deathreadiness.com
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Your parents paid thousands of dollars for a trust but no one ever transferred their assets into it. Did the estate planning attorney do something wrong? Today, I break down what “funding a trust” actually means, who should do it, and why skipping this step can cost families hundreds of thousands of dollars. More importantly, I explain the hidden emotional cost to adult children when they end up doing the administrative work of funding a trust themselves.
Welcome to The Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni — estate planning attorney, death readiness guide, and your translator for wills, trusts, probate, and the conversations most families avoid. If you’ve been wondering things like, ‘Can a trust protect what I leave to my children?’ ‘What happens if I give someone power of attorney over me?’ and ‘How can I help my parents while respecting their independence?’ You’re in the right place.
Before we get into today’s question, I want to talk about a small change to the podcast schedule.
As some of you know, I’ve started practicing law again. And I’m loving it. The last time I practiced, I worked at a firm with about 2,000 attorneys. So moving from that environment to running my own firm with an attorney count of one is a pretty big shift.
The reason I waited so long to do it is because I was afraid. I didn’t know if I could pull it off on my own.
But over the holidays, when we were visiting my dad in the Adirondacks, I went snowshoeing with one of our dogs, Artie. We have three dogs, and for some reason that day it was just the two of us. Artie is the oldest of the three, and we were just out there enjoying the quiet and the snow. I also had some space to think about life and about where I wanted my professional life to go next.
When I got back, my husband and I started making dinner, and I told him I had gotten some clarity out in the woods with Artie. I told him I wanted to start practicing law again and that I wanted to do it on my own.
He said he thought it was a great idea. And the more I thought about it, the more I did too.
So when we got home in January, I started putting the pieces together. And now here I am practicing law again.
If you’ve listened to this podcast for a while, you probably know how I feel about the law. I love it. I love the rules, the nuance, and the way complicated ideas can actually make sense when you slow down and walk through them. I’m incredibly grateful for my legal education, and I love making the law accessible in real-world situations.
But there’s one practical consequence of all of this: now that I’m practicing law again, I have less time to devote to the podcast.
The Tuesday Triage episodes are really important to me, and I think they provide the most immediate value. So you’ll still see a new episode every Tuesday in your podcast or YouTube feed.
The Friday episodes, which used to come out every other week, won’t be on a regular schedule anymore. I’ll still record them occasionally, but they’ll be more like bonus episodes when I have something I want to share.
And thank you for listening. I love making these episodes for you and I also love being back in the practice of law.
Now, back to today’s question.
Today’s question is one I hear all the time. Or, more accurately, it’s a complaint.
A complaint about estate planning attorneys when people feel they didn’t do everything they should have.
And the most common version of that complaint is this:
“My parents had a revocable trust drafted… but the attorney never funded it.”
Before we dig into that complaint, let’s make sure we’re all on the same page about what a revocable trust actually is.
Let’s start with the basic definition of a trust. A trust is a legal arrangement where one person, the trustee, holds and manages assets for the benefit of someone else, called the beneficiaries.
The rules for how a trust works are written in a document called a trust agreement. You can think of it like a contract between the person who created the trust, called the grantor or settlor, and the person responsible for managing it, known as the trustee. The agreement lays out who receives the assets, when they receive them, and under what conditions.
But here’s the really important point.
A trust is just a written agreement. And that agreement only controls the assets that are actually transferred into the trust.
So if you own an asset in your individual name—like a bank account, an investment account, or a piece of real estate—that asset has to be transferred into the trust, or re-titled so that the trust becomes the owner, in order for the trust to control it.
Today we’re focusing on one specific type of trust: a revocable trust. A revocable trust simply means a trust that can be changed or revoked during the lifetime of the person who created it.
There are two main reasons people use revocable trust.
The first reason is asset management, both now and in the future.
A revocable trust allows you to place your assets into one central structure. That can make it much easier to keep track of what you own and much easier for a successor trustee to step in and help manage things if you ever need assistance, whether that’s an adult child, a trusted friend, or a professional.
And this isn’t just for people with huge estates. Even people with modest assets may reach a point where they need help managing finances because of age, illness, or cognitive change. A revocable trust can provide a clear structure for that support.
The second major reason people use revocable trusts is to avoid probate.
Probate is the court-supervised process for distributing your probate assets after you die.
If you’d like a deeper explanation of probate and the difference between probate and non-probate assets, I’ll link to Episode 38, Why You Need (or Don’t Need) a Will in the show notes.
And, if you’d like to learn more about revocable trusts, including when they make sense and when they don’t, I’ll link to Episode 19 in the show notes.
But for now, to get us closer to answering the question about whether your estate planning attorney should fund the revocable trust, let me tell you about someone I was recently working with. I’ll call him Bob.
Bob is a widower, and he wanted a revocable trust for two main reasons.
First, he wanted to make it easier for his daughter to help manage things if he ever needed support.
And second, he wanted to avoid probate.
Bob lives in California, as does his daughter, who I’ll call Jessica, and her two children.
Bob’s daughter Jessica introduced me to Bob. Jessica’s mom, Bob’s wife, had died a year earlier. Jessica is Bob’s only child and she wanted to make sure that she had the tools to take care of him if he ever needed her.
Bob is in his eighties and he’s in good health, both cognitively and physically. Bob has lots of friends his age – he plays bridge and knasta through local organizations. And he’s seen how quickly things have changed for his friends. So, when Jessica suggested that Bob work with me, he was open to it.
I worked with an attorney in California to draft his estate planning documents. Bob named Jessica as his agent under both his healthcare and financial powers of attorney. And he named her as co-trustee of his revocable trust. Importantly, Bob gave Jessica the power to act unilaterally, meaning without his consent, so that she could take over and help him if needed.
But once Bob paid the $5,000 for the attorney to draft his California estate planning documents, he was done.
And, if you’re listening and thinking that $5,000 is a lot, I have found it to be the average cost for an estate plan of average complexity. I offer estate planning for Tennessee residents for a flat fee, which is based on each client’s specific circumstances. My average cost is $3,500, so slightly less than the $5,000 I have seen as a national average, but, regardless, you should be prepared to pay a decent sum for a full set of estate planning documents.
The problem is that the estate planning documents that Bob signed were just that, documents. In order to make his estate plan work, he needed to take all the things that he owned and transfer them into the revocable trust. This is what’s called “funding the trust.”
Now, as part of the $5,000, Bob’s attorney did have Bob sign the deed transferring his California home into the revocable trust. I asked the attorney not to record the deed until I had confirmed that Bob updated his insurance with the new ownership.
Bob asked his daughter Jessica to help him. So, she called the insurance company with Bob on the phone with her. She asked them to list the trust as the new owner and Bob as an additional insured.
Why does this matter?
If Bob transferred his home into his revocable living trust but did not update his homeowner’s insurance policy, he could be unprotected in the event he needs to file a claim. Let’s say that a fire started and caused significant damage to Bob’s home. The insurance company does a routine investigation which reveals that the revocable trust, not Bob, owns the property. This mismatch could give the insurance company grounds to deny Bob’s claim, leaving him financially exposed.
After Jessica spoke with the insurance company, she emailed me to confirm that she and her dad had updated the policy.
I asked her if she could log into Bob’s account and double-check that the change had actually been made. Because there’s a big difference between someone saying they’ll update something and it actually being updated.
She wrote back and told me it hadn’t been changed.
So she called the insurance company again, this time without her dad on the phone, and they wouldn’t update it. They insisted Bob had to be involved again. Jessica explained that she had already called with him and that the agent had told them it would be taken care of.
But now she has to coordinate with her dad and start the whole process over.
And Jessica’s experience here is not unusual. This kind of administrative friction happens all the time.
Bob has managed his own finances for his entire adult life without the help of a financial advisor. He has accounts with Schwab, Vanguard, E-Trade, and several other institutions. To fund the revocable trust, he needs to contact each institution individually, explain what he’s trying to do, deal with representatives who may or may not understand the request, and follow up when things inevitably fall through the cracks.
And Bob wants Jessica to do all of this with him.
Because, in his mind, it’s free to use Jessica.
But is it really free?
Jessica works full time and has two kids. In the small amount of free time she has, does Bob really want her spending hours on frustrating phone calls with financial institutions, calls that raise everyone’s blood pressure?
And can Bob really not afford professional help to fund his revocable trust?
The California law firm that drafted Bob’s estate planning documents actually offers trust funding as an additional service.
Bob is currently renovating his kitchen. He went on an Alaskan cruise in September. And in January he made annual exclusion gifts of $19,000 to each of his two grandchildren.
His net worth is roughly eight times my own.
So the money is there.
My guess is that Bob simply doesn’t see the value in paying someone to help fund the trust.
So let’s talk about the value.
First, let’s look at the hard numbers.
To keep the math simple, let’s assume Bob has a $10 million estate, not including his home, since we know the deed transferring the house to the revocable trust has already been signed.
If Bob never funds his revocable trust, that $10 million would pass through his probate estate.
Now I’m simplifying a little here, because I know Bob has retirement accounts and has named Jessica as a beneficiary. If she survives him, those accounts would pass directly to Jessica outside of probate.
But let’s assume the entire $10 million goes through probate.
In California, probate fees are set by statute. Both the executor of the estate and the attorney for the executor are entitled to fees based on the gross value of the probate estate.
Here’s how those fees are calculated:
• 4% of the first $100,000 — $4,000
• 3% of the next $100,000 — $3,000
• 2% of the next $800,000 — $16,000
• 1% of the next $9 million — $90,000
For a $10 million probate estate, that adds up to $113,000 in statutory fees for the executor.
And the attorney for the executor is entitled to another $113,000.
That’s $226,000 in probate fees just to transfer Bob’s assets to the revocable trust after his death.
That’s the financial cost of not funding the trust.
But there’s another cost, too.
Jessica wants to be a good daughter. She also wants to be a good mom to her two kids, a good partner to her husband, and a good employee at work.
And it’s very hard to be everything to everyone.
Jessica wants to help her dad. But she probably doesn’t want to become his administrative assistant, and that’s the role he’s unintentionally putting her in.
I suspect Jessica would gladly tell her dad not to gift to her kids, which would save him $38,000, if it meant he would spend a few thousand dollars to hire someone to properly fund the trust.
So what’s the solution?
What Bob needs now is practical help, someone who can actually carry out the steps required to make the plan work.
The reality is that creating an estate plan and implementing an estate plan are two different things.
Drafting the documents is the legal work. Funding the trust—the phone calls, the paperwork, the follow-ups with financial institutions—that’s administrative work, really important administrative work.
And when that administrative work doesn’t get done, the entire estate plan can fall apart.
This is where a lot of families get stuck. The lawyer drafts the documents, the client signs them and everyone feels relieved that the estate plan is “done.”
But the plan isn’t finished until the assets are actually aligned with the documents.
In the next part of the episode, I’m going to mention two professionals who help with the practical side of planning once the legal pieces are in place.
Neither of these professionals asked me to mention them. I’m not paid to refer clients to them, and I don’t receive anything if you decide to work with them.
I’m sharing their names because I trust them and because I know how difficult it can be to find professionals you trust when you’re dealing with something as important as your estate plan.
Because of the hourly rate that I charge, I don’t think it’s cost-efficient for clients to pay me to handle the administrative side of funding a trust. And because I’m currently a solo practitioner without support staff who could perform that work at a lower hourly rate, I refer clients who need help with trust funding to a professional who specializes in exactly this type of work.
Her name is Mollie Lacher, and she’s the founder of Sunny Care Services, a Tennessee-based company. I’ll link to her information in the show notes.
Mollie isn’t an attorney, but she understands exactly how the trust funding process works. I worked with her when I was practicing law in Nashville, and I’ve continued to refer clients to her now that I’m practicing again.
The good news for anyone listening is that Mollie works with clients nationwide to help fund revocable trusts.
If you create a revocable trust and never fund it, you’re not getting the full benefit of the estate plan you paid for. In many cases, you’ve spent thousands of dollars drafting documents that may never actually accomplish what they were designed to do.
Now, I don’t think it’s wrong if someone had estate planning done and the attorney didn’t fund the trust. But I do think it’s a problem if an estate planning attorney fails to explain that the trust must be funded, or fails to guide the client through what that process involves. Your estate planning attorney should absolutely explain that step and help you understand what needs to happen next.
But I don’t think the attorney is failing to fulfill their professional duty if they don’t personally handle the trust funding unless the client hires them to do that specific work.
Now, is there anything else Bob can do, besides hiring someone like Mollie, to make managing his assets easier for himself today and easier for Jessica to step in and help if she ever needs to?
Yes, there is.
I would recommend that Bob develop a relationship with a financial advisor and consolidate his accounts.
Earlier I mentioned that Bob has accounts at Schwab, Vanguard, E-Trade, and several other institutions. That’s a lot for one person to manage. And without a dedicated team helping Bob, it’s going to be difficult to transfer all of those accounts into the trust.
Bob also has several different IRA accounts that could be consolidated. In the past, he’s made mistakes withdrawing his minimum required distributions simply because there was too much to keep track of. The penalty today for missing an RMD is 25% of the required distribution. In earlier years, when the penalty was 50%, Bob paid significant penalties simply because the system he had in place was too complicated to manage.
A good financial advisor can help simplify all of this.
I personally work with a financial advisor at RW Baird. Her name is Blair Martin.
I trust Blair in much the same way that I trust Mollie, who I mentioned earlier.
Now if you already have a financial advisor you love working with, that’s wonderful. But if you’re like I was a couple of years ago, and you have no idea where to begin, I’ll include Blair’s contact information in the show notes. Blair works out of Lexington, Kentucky, but she works with clients nationwide. I live in Michigan and I work with her.
I’ve consolidated my accounts with Blair, and my husband is in the process of doing the same.
The main point I want to leave you with today is that while legal documents matter, estate planning isn’t just about the documents. It’s about the entire system that surrounds those documents.
If you have a revocable trust, please make sure it’s funded. Your attorney should guide you through the process, but it’s unlikely they’ll personally handle every administrative step involved.
If that process feels overwhelming, hire someone who specializes in trust funding. I recommend Mollie Lacher at Sunny Care Services, and I’ll include her information in the show notes.
And consider simplifying your financial life by consolidating accounts and working with a financial advisor you trust, someone who understands your situation and who can help your family navigate transitions when life inevitably changes. I work with Blair Martin at RW Baird. I’ll include her information in the show notes as well.
Because in a crisis, the last thing you want is for your spouse or your child to be sitting on hold with a large financial institution while they’re trying to activate their authority under a power of attorney or serve as executor of your estate.
Good estate planning should make life easier for the people you love.
And, if you’re in Tennessee and you need estate planning documents drafted, or you’re handling an estate after someone has died and want steady legal guidance along the way, let me know. I’m happy to be practicing law again and am offering estate planning and probate solutions designed for real-life situations, not just paperwork. You can reach me at jill@deathreadiness.com That’s jill@deathreadiness.com
Thanks for listening today.
This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.
