For those who want to ensure that their estates avoid the probate process, creation of a revocable living trust is often—but not always—the best approach. One common problem: too many people who establish trusts fail to coordinate the titles and beneficiary designations, or allow those designations to change in the years after trust formation.

In most cases, for example, the settlor of a trust (the person who signed the trust instrument) will want his, her or their home to be owned by the trust. A good estate planning attorney will make that transfer as part of the trust creation. But over time, with refinancing, new home purchase and change of family situations, the home might well get transferred out of the trust’s name, and either subject the asset to the probate process or change the distribution provided for by the trust itself—or both.

It is an important and frequently misunderstood concept: beneficiary designations, joint ownership arrangements and “pay on death” titles will override the provisions of a trust—and even of a will. Even though the problem is widely discussed (see, for instance, the recent article by Newseek's Jane Bryant Quinn addressing the issue, and quoting Fleming & Curti's Robert Fleming on the subject), it continues to plague estate planning attorneys. For instance, though it may seem appropriate to put one child’s name on a bank account as joint owner “just in case something happens,” the effect is to change the distribution plan created under even the most carefully crafted trust (or will).

Retirement accounts usually create special problems. In most (but not all) cases, experts warn against having either a trust or a probate estate as beneficiary of a 401(k), IRA or other retirement account. For almost all of those account types (except IRAs), it is necessary to secure a spouse’s signature on any beneficiary change. Retirement account managers at work and in financial institutions commonly advise owners about the best choices of beneficiaries, and there is a veritable cacophony of advice in the popular press. As a consequence, over time the “correct” beneficiary designations established at the time of creation of a trust or other estate plan often gets changed over the years to a new arrangement that may completely or partially undo the original plan.

What can you do? You should regularly review your estate plan with your attorney. He or she needs to know all about your assets and the actual name in which each account or property is held, and to have copies of your beneficiary designations as they currently exist. This type of review needs to be undertaken at least once every few years—ideally, an annual review would be desirable. Estate planning attorneys understand that their clients won’t make time for an annual review, but a meeting with your attorney—preferably the same one who established your estate plan in the first place—at least every three to five years is essential.

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