Second Marriage? FUND YOUR TRUST! A Pour Over Will is Subject to Spousal Claims

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A Pour-Over Will is Subject to Spousal Claims

A recent case provides an object lesson for those in a second marriage who either have a trust separate from their spouse, or have retained their original trust upon remarriage.  The case is also instructive regarding trust funding in general. 

Only a properly and completely funded trust protects your estate planning choices. A pour-over will does not magically repose assets in your trust upon death; it must be probated in order to be effective, at least in most states.  Probate means risk, cost, and expense. A pour-over will is subject to the same limitations, requirements, risks, costs, expenses, advantages and disadvantages and rewards as any will created where there is not trust.  One of these risks is spousal claims.

The Montana Supreme Court held that a widow could claim a spousal elective share of the deceased husband's estate, notwithstanding that her deceased husband’s will directed everything to his trust, and, by implication, even if the trust provides a substantial share to the surviving spouse. In Silverwood v. Tokowitz (Mont. No. S-23-0114, January 12, 2024).

Carol Tokowitz was married to her husband, Neal Tokowitz, for 30 years before he died. Mr. Tokowitz left behind surviving children from a previous marriage. He had a pour-over will that funded a revocable living trust. His will did not name his wife or anyone else as a beneficiary, but, as is customary, directed assets only to the trust.

Mr. Tokowitz's executor, Mr. Silverwood, filed a petition to probate the will, suggesting that some assets or property were not owned or controlled by the trust.  Mrs. Tokowitz asserted her rights to the elective share of her late husband’s estate under the Wyoming spousal elective share statute.

An elective share is a term used to describes a proportion of an estate which the surviving spouse of the deceased may claim in place of what s/he was left in the decedent's will. It may also be called a widow's share or statutory share, or described as an election against the will, or a forced share.  In Ohio it is governed by Ohio Revised Code 2106.01 (last accessed 2/10/2025), and is often described as a surviving spouse "taking" against the will.  In Missouri, it is governed by Section 474.160 of the Revised Statutes of Missouri (last accessed 2/10/2025).

The Wyoming spousal elective share statute provides that a married person domiciled in the state must provide a spouse at least an elective share subject to distribution in the will. If, as in this case, the surviving spouse is not a parent of the decedent’s surviving children, the elective share is a quarter or twenty-five (25%)of the estate.

The probate court granted Mrs. Tokowitz her spousal share.  Mr. Silverwood and a trustee, Randy Green, (hereafter referred to simply as "Mr. Tokowitz's family")  argued that she was not entitled to take a spousal elective share and that taking an elective share should prevent her from receiving anything from the trust. In essence, Mr. Tokowitz's family was arguing that granting her an elective share, on top of a percentage of the assets in the trust estate permitted Mrs. Tokowitz to receive more that Mr. Tokowitz intended her to receive.  Indeed, given an elective share of the probate estate, it is likely that Mrs. Tokowitz's total inheritance exceeded that which she would have received if all assets had been reposed in the trust at death.  A hypothetical illustration follows:

The probate court declined to make any ruling regarding disposition of the trust estate.  Mr. Tokowitz's family appealed. 

Mr. Tokowitz's family first argued that although Mr. Tokowitz was a Wyoming resident, he was not domiciled in Wyoming full-time.  A domicile is a legal residence where a person intends to stay. A person can have many residences but only one domicile. The Supreme Court rejected the argument.  The petition to probate the will (filed by Mr. Tokowitz's family) will stated that he was a resident of Park County, Wyoming, but the pour-over will stated that he was domiciled there. According to the court, since the will presented evidence that the decedent’s domicile was in Wyoming, Mrs. Tokowitz met her burden of establishing a Wyoming domicile. The burden then shifted to Mr. Tokowitz's family to disprove the statement in the will, and they failed to show that Mr. Tokowitz was domiciled elsewhere. According to the Supreme Court, it was sufficient that the probate court implied that Mr. Tokowitz was domiciled in Wyoming when the will was created and executed, and applied Wyoming law to determine Mrs. Tokowitz's elective share.  In other words, the probate court did not make an explicit "finding" regarding Mr. Tokowitz's domicile.    

The Tokowitz's family's next argument concerned the amount Mrs. Tokowitz would receive under the trust. They asserted that the probate court should not have given her the elective share because it did not know whether she would receive more or less than a quarter of the estate under the trust. The Supreme Court dismissed the argument holding that the trust’s terms are not relevant to the probate estate. The spousal elective share statute solely pertains to the will. Mr. Tokowitz’s will only left his property to his trust and did not name his wife, which effectively entitles her to the spousal elective share statute.

Finally, Mr. Tokowitz's family claimed that the property was not subject to probate because the will poured all assets and property into the trust. Property that passes by way of a pour-over will, however, is part of the probated estate and subject to the spousal elective share. Assets that transfer through a pour-over will are not exempt from the probate estate, or its rules and regulations simply because they estate assets ultimately repose to a trust.

The Supreme Court held that the lower court did not err when it declined to rule on Mrs. Tokowitz’s interests in the trust, holding that once the assets pass to the trust, they become non-probate assets. The Supreme Court could find no  case law or statutory authority supporting a ruling on non-probate assets in the probate case.

The Supreme Court of Montana held that the district court correctly allowed Mrs. Tokowitz to take a spousal elective share, and that the lower court rightly determined that it lacked jurisdiction to rule on claims arising from the trust.

This case became very complicated by the circumstances and the law.  One assumes the value of the assets warranted appeal to the Montana Supreme Court. All of the complexity, cost, and expense would have been unnecessary if the property and/or assets were funded to the trust prior to Mr. Tokowitz's death. 

Planes, Trains, and Automobiles- In or Out of a Revocable Living Trust?

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Planes, Trains, and Automobiles Should Normally Be In Your Revocable Living Trust

In the video above, I discuss a recent MSN.com article entitled "Five Items to Leave Out of Your Revocable Living Trust."  (the article link is already broken, but there is an image in the video, and you can also view the article online here (last accessed 1/18/2025); you will have to scroll down past the first few articles). 

The author writes as follows:

         "Vehicles. Whether it’s a ’63 Corvette, Harley chopper or prop plane, all that’s required to pass it on is a simple written instruction to transfer the title to a beneficiary. In a trust, you’re exposed to lawsuits over accidents that involved the vehicle." 

Generally, I disagree. Vehemently.

In the video, I discuss the following:

1. Articles, publications, seminars, and presentations should never be construed as legal advice

2.  The author suggests that only a simple written instruction is necessary to transfer a title to a beneficiary, which statement is misleading or incorrect.

3.  Beneficiary and Transfer on Death Designations may sometimes work to avoid probate, but they have limitations and risks, and do not constitute a 'plan' to avoid probate (see links below).  

4. The liability issue raised by the author makes no sense for most revocable living trusts settled in most states.

5. The author assumes that the only purpose of a revocable living trust is to avoid probate, which is untrue, and assets outside of a trust do not serve and may impair lifetime planning benefits of a trust:

• Consistent and competent lifetime management of assets is a lifetime planning objective best accomplished with a trust.

• Guardianship avoidance is a lifetime planning objective best accomplished with a trust.

• Protection of assets from a court-appointed guardian is a lifetime planning objective that can only be accomplished with a trust.

• Aging in Place Planning is a lifetime planning objective that can only be accomplished with a trust.

I acknowledge in the video that there are always exceptions, and that the author may not have actually been considering revocable living trusts when drafting the article, but generally I disagrees with the headline and conclusion of the author regarding planes, trains, and automobiles. 

Consider additionally the following: 

• Beware Direct Transfer Designations (TODs and PODs);
• Aging in Place Planning Heightens Necessity of Trust Funding;
• Beware Direct Transfer Designations (TODs and PODs)- Part II: Ohio Transfer of Death Designation Affidavit (TODDA) for Real Estate- Lapse of Insurance Coverage;
• Beware Direct Transfer Designations (TODs and PODs)- Part III- Transfer on Death Deed for Real Estate Results in Loss of Insurance Coverage and Impairment of Asset Value.   

I urge you to attend an "Aging in Place Planning" presentation by signing up for an upcoming live webinar.  You can find these periodically on my blog or on the events page of the firm's Facebook page.  You don't need to wait, however, for a scheduled event; there is a recorded version available here: https://bit.ly/Aging-in-Place-Workshop.  You might also consider inviting your children and trusted advisors to attend.

 

Funding Your Trust

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Funding a trust is the most important first task in implementing the trust. It begins immediately upon executing or signing the trust, and consists of transferring all of your assets and property to the trust. A trust only governs the property or assets it owns or controls. In the video, Attorney Donohew introduces and explains how to use a Trust Funding Checklist to ensure that a trust is fully and properly funded.

Once your Trust is funded, you will need to keep and maintain the trust by, among other things, keeping the trust funded with newly acquired assets. If you purchase a new house or additional real estate, for example, the new property will need to be put in your trust. If you take title directly in the name of the trust, you won't have the administrative burden of preparing a new deed. Similarly, If you open a new bank or investment account, opening it directly in the name of the Trust will make it easier. In other words, keep your trust in mind as you make other legal and financial decisions.

You should also review your estate plan, and the documents that comprise the plan periodically. You should also review your plan after any major change in your life, or in the lives of your beneficiaries and fiduciaries, and any time your circumstances, goals or needs change dramatically. Regardless, the law and practice change periodically, so even if everything in your life seems to be stable and consistent, periodic review ensures that your plan is taking advantage of developments, and is not harmed or thwarted by changes in the law or practice.

Click to get your own Checlist: Funding Instructions Checklist.

The following are important articles regarding trust funding and links to funding forms:

ARTICLES

• A Signed and Recorded Deed is Necessary to Prepare A Deed Funding Your Trust
• Aging in Place Planning Heightens Necessity of Trust Funding
• Tenant's Estate Sues Landlord for Buyout Payment- Contracts and Agreements Are Assets

FUNDING FORMS*

Single Person

• Bank, Credit Union, Accounts and Safe Deposit Boxes 
• Investment Accounts (Stocks, Bonds, Mutual Funds)
• Stock Certificates
• Savings Bonds (call counsel)
• Life Insurance Beneficiary Designation
• Life Insurance Change of Ownership
• Non-Qualified Annuity Beneficiary Designation
• Non-Qualified Annuity  Change of Ownership
• Retirement Plan, IRA, SEP, Keough, TSA. Qualified Annuity Beneficiary Designation
• Homeowner's, Property & Casualty Insurance Policy ANI
• Motor Vehicle Insurance Policy ANI
• Motor Vehicle Title (Ohio)
• Motor Vehicle Transfer on Death (Missouri)

COUPLES

• Bank, Credit Union, Accounts and Safe Deposit Boxes
• Investment Accounts (Stocks, Bonds, Mutual Funds)
• Stock Certificates
• Savings Bonds (call counsel)
• Life Insurance Beneficiary Designation
• Life Insurance Change of Ownership
• Non-Qualified Annuity Beneficiary Designation
• Non-Qualified Annuity  Change of Ownership
• Retirement Plan, IRA, SEP, Keough, TSA. Qualified Annuity Beneficiary Designation
• Homeowner's, Property & Casualty Insurance Policy ANI
• Motor Vehicle Insurance Policy ANI
• Motor Vehicle Title (Ohio)
• Motor Vehicle Transfer on Death (Missouri)

The forms provided on this page are general and simple forms.  These use of any or all of these forms may not be applicable to your situation and circumstance.  Accordingly, these forms should be used only after consultation with counsel. 

Nothing contained herein should be construed as constituting legal advice which can only be given by a licensed attorney familiar with you goals, needs, and circumstances.   

Aging in Place Planning Heightens Necessity of Trust Funding

Traditionally, the creation and funding of a trust to provide for your loved ones upon your passing was motivated primarily by a desire to avoid probate and make the administration easier and private.  With the advent of Aging in Place Planning, and Guardianship Avoidance and Protection, two modern goals that focus on protecting YOU during YOUR life, trust funding becomes even more important.  

Funding a trust is often described as the process of transferring ownership of your assets from your individual name to your trust. Having your assets owned by the trust provides you many different benefits directly related to the type of trust created, ranging from asset protection, tax avoidance or minimization, and/or probate avoidance. To ensure that you receive the full benefit of your trust, you  physically change the titles from your individual name (or joint names if marries or domestic partners) to the name of your trust. A trust can only control the assets that the trust (trustee) owns.

You may have a well-designed and well-written trust document, but until you fund the trust, it doesn’t control anything. Unlike a will, you aren’t finished with a trust simply by signing the document; you must, with rare exceptions, fund your trust while you are alive, able and of sound mind.

With probate avoidance trusts, so long as title of property is not in an individual name, and non-trust assets avoid probate through direct transfer designations (beneficiary, transfer on death, and payable on death designations), the objective is attained.  With trusts designed to capture additional benefits during your lifetime, however, merely avoiding probate is not sufficient; trust funding must also ensure control and management of the asset during your life.  Even in a simple probate-avoidance trust, the trust-funding strategy should include changing the beneficiary designations of your life insurance policies, annuities,  retirement accounts, and other investment accounts, to insure your trust so proceeds will go into your trust upon your demise.  The limitations and disadvantages of direct transfer designations make them ill-suited to achieve lifetime planning objectives such as aging in place or guardianship planning.   

In a lifetime planning trust such as one incorporating aging in place planning, trust control during you lifetime is paramount.  An illustration will help understand the distinction and it's importance.  Mary Baker has a non-qualified annuity on her life in the amount of $250,000 as part of her estate, and seeks to avoid probate, but also to avoid guardianship and a guardian's control of her assets, and age in place.  Following her financial planner's advice she changes the beneficiary of the annuity to her trust.  Although her attorney provided her with direction to change the ownership of non-qualified annuities to her trust, and forms to accomplish this change, she is comforted by the ease of a simple beneficiary change handled by her agent.  Although she has effectively avoided probate the annuity remains in her individual name.  A court-appointed guardian will quickly control the annuity, and may use it to whatever legal purpose the guardian articulates, including paying the guardian's fees and expenses, paying agents hired by the guardian, and paying for long-term institutional care in a nursing home over the objection of Mary Baker and her family! 

If Mary Baker changes ownership of the annuity to her trust during her lifetime, a court-appointed  guardian is not automatically conferred control of the asset upon appointment;  in most states, a guardian must seek court approval to manage trust assets, and may only do so with prior approval of the appointing court.  This distinction starts to explain the strategy of guardianship protection in a properly designed and implemented trust.  At a minimum,  the asset is not automatically available as incentive to a guardian: an asset generating a percentage fee for control and management.  Moreover, your trustee can fight to protect the asset from guardian control with standing in the probate court.  Better, your trustee can manage the asset to keep it unavailable to the guardian, by, for example, transferring the asset from a revocable trust far too easily accessible to the guardian, to another form of ownership less easily accessible to the guardian.  Most importantly for aging in place planning, use of the asset for unwanted and avoidable institutional care is better controlled.  

Funding your trust is not a difficult process.  It is, nonetheless, a strategic process that will take some time and effort.  The process may differ depending upon your trust, and/or depending upon your  specific situation, circumstances, goals, and objectives. 

Your first step is to make a list of your assets, their values and where they are located. Once you have your assets listed, let the trust funding strategy begin. Remember that any assets you are electing to fund into your trust will require changing the name on each asset to the trust and/or changing the beneficiaries to the trust.

If you have signed trust documents but are not sure if you have properly funded your trust, call your lawyer!  Your lawyer can review your documents and let you know if the funding of your trust is complete.  You can also review your funding effort against a checklist.    

A Signed and Recorded Deed is Necessary to Prepare A Deed Funding Your Trust

One of the more common questions clients ask is why they must provide a recorded deed in order to prepare a new deed funding a trust?  The question often follows a client forwarding an unsigned deed that a title company provides the buyer of property in a closing package.  Unfortunately, these unsigned documents do not provide the information needed to prepare a new deed.

A previously recorded deed is needed for a variety of reasons.  The most important of these is that a new deed must include a reference to the prior recorded deed, which reference is an Instrument Number (Book and Page Number in older deeds) best obtained from the recorded instrument.  

There are other reasons:

1. The legal description may have been changed by interlineation at the time of recording;
2. Limitations or restrictions to further recordings may have been noted on the deed  by the Engineer's (Tax Map) office, e.g. "No Further Transfers Without A Survey");
3. The name or marital status of a party may have been altered or supplemented immediately prior to, or at the time of recording.

The bottom line is that the most recently recorded deed is necessary.  Sometimes an attorney can, and will if possible, obtain the deed electronically in those counties that make the records available online.  In a few cases, however, the deed is unavailable electronically, either because the county does not make recorded deeds available online, or the deed may have been recorded prior to the date on which the county began online electronic availability.  Older deeds may not be accessible in even the largest counties that first began online electronic availability.  

You can obtain your deed from either the county recorder or from the title company that closed your purchase or last re-finance transaction.    

If you need additional help, email Chris at chris@donohew.com.  She can offer additional assistance, including ordering a tax and legal report from an abstracting company if necessary.