All too often, a client signs a trust, but fails (perhaps despite reminding) to re-title accounts and other assets in her name as trustee. When she passes, this failure will not be consequential if her probate estate is governed by a pour-over will or otherwise passes to the same beneficiaries in the same proportion as under the trust. But, what if the probate estate benefits completely different persons? In that event, the trustee and his counsel should carefully evaluate whether a claim can be made that the assets, even though not so formally titled, are, nonetheless, trust assets.
Both the NH and MA trust codes provide that “[a] trust may be created by… declaration by the owner of property that the owner holds identifiable property as trustee…” The statutes do not require formal re-titling; rather, they require only a “declaration … that the owner holds identifiable property as trustee.” Thus, if in the trust instrument, another document, or an oral statement, the settlor affirms that specific identifiable assets are trust property, the trustee upon the passing of the settlor may be able to claim them even if they are not formally titled in the trust. Because such a claim if successful will tend to impoverish the probate estate and harm its beneficiaries, the administrator may well oppose the claim.
Counsel should bear these principles in mind whenever representing a trustee upon passing of the settlor where the dispositional schemes of the trust and probate estate vary.