Imagine a bulletproof, fireproof, leakproof strongbox. Only you and one other person know the combination. You have left directions that if something were to happen to you, the contents of the strongbox should go to your friends and family. But when the box is finally opened, what if the contents were not adequate to provide for your loved ones? Or what if there were nothing in the strongbox at all?
Your assets are vulnerable without protection, but the secure "strongbox" of a trust is useless without something to protect.
Thus, in order for a trust to achieve your estate planning goals, it has to be more than a trust in name only. Even if you set up a living trust and designate a trustee, you still need to follow through on the most important part of having a trust: funding it.
Funding a trust is essential. To fund a trust simply means to transfer assets into your trust. The fundamental step in funding a trust is to make sure to title in the name of the trust the assets that you plan to transfer. Unless you title the property in the name of the trust, you cannot fund the trust and consequently to trustee cannot control that property. And as a result, that property will be subject to probate after your death.
Surprisingly, many people fail to fund their trust properly or adequately. Your first step should be to take stock of all your assets and determine how each asset is owned. You can then determine if (and to what extent) each asset should be made a part of the trust.
If you live in Michigan and need experienced estate planning help, contact Michael Einheuser for a free consultation. Michael helps families in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township, Bloomfield Township, and the surrounding Michigan areas.
Schedule your Free Consultation today: (248) 398-4665.
In order to fund your trust properly, you can transfer ownership of several kinds of assets to the trust:
Because of tax implications of the following assets, however, you might not want to transfer them directly into the trust:
If you have a life insurance policy or retirement account with a named beneficiary, you can name your trust as the “contingent beneficiary” of these assets. Therefore, if the named beneficiary of those assets should die before you, the assets would then go into your trust and thus avoid being subject to probate.
You can fund your revocable living trust immediately upon creating it, or you can fund it at a later time (or even at the time of your death). But it is advisable to fund the trust initially, and then regularly update your trust (either by transferring more property into it, or pulling property out).
Funding a trust, in short, is usually a continuous process, not a one-time action. The contents of your estate will be in flux for the rest of your life, so your estate plan should be flexible as well.
Of course, what you choose to include in your revocable living trust is entirely your decision. The structure and content of your trust should be specifically tailored to your individual estate and to your personal plans for taking care of your assets and your loved ones.Return from the Funding Trust article to the Home page by clicking here.