ABSTRACT
For decades, a single tactic has dominated American estate planning. By transferring assets to a revocable living trust (‘rev trust’), individuals can bypass the notoriously slow, expensive, and public probate system. But because rev trusts operate privately, there is no data on how well they function. This Article conducts the first empirical study of trial-level matters involving rev trusts-a review of 1,568 cases filed between 2014 and 2020 in San Francisco-and finds that a surprising number of rev trusts do not achieve their objectives. The culprit is what we call the ‘trust transfer problem’: during their lives, settlors often fail to satisfy the finicky rules that govern the conveyance of property into their rev trusts. This little-noticed breakdown in the inheritance process is so pervasive that it accounts for a quarter of the trust department’s workload. The Article then reveals that the trust transfer problem causes three kinds of harm. First, at bare minimum, survivors must obtain an order from the trust department that the settlor intended property to belong to the trust. Having to take this step undercuts the benefits of probate avoidance by causing delays, generating costs, and exposing intimate details about the settlor or their loved ones. Second, the trust department sometimes denies requests to retitle assets in the name of the trust, sending the property into probate – the very regime that rev trusts are designed to avoid. Using another hand collected dataset of San Francisco probate administrations from the same timeframe, we follow these cases through this extra level of judicial review and find that they invariably drag on for years and incur thousands of dollars in fees. Third, in extreme situations, even this double dose of court intervention can be insufficient to convey possessions into the trust. This outcome thwarts the settlor’s dispositive choices by effectively disinheriting the trust’s beneficiaries. Finally, the Article proposes a straightforward solution to the trust transfer problem. It argues that this issue is endemic because the law assumes that non-transferred property does not belong to a rev trust and requires interested parties to prove otherwise. But this is backwards. Almost every settlor intends their rev trust to contain everything they own. Thus, states should pass laws declaring that the mere act of executing a rev trust showcases the settlor’s intent to funnel all of their assets into it when they die. This forgiving approach would better serve decedents’ wishes, reduce burdens on estates and the judicial system, and bring this area into alignment with the functionalism of modern inheritance doctrine.
Horton, David and Weisbord, Reid K and Ryan, Christopher, The Trust Transfer Problem (February 12, 2025), 104 North Carolina Law Review (forthcoming 2025).
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