Estate Planning Mistake: You Have a Revocable Living Trust … BUT You Have Not Funded It!

A revocable living trust is often used as a substitute for a last will and testament.  Among other things, a living trust is a great way to make sure your family does not have to go through the probate process and get bogged down in the court system after you die.

A critical part of the trust process is putting your assets in the trust.  This is called funding the trust.  For instance, you might transfer stock or investment accounts to the trust.  Once your assets are in the trust, they don’t have to go through the probate, a time-consuming and expensive process.  In other words, a living trust enables your beneficiaries to receive your family treasure upon your death, with no complications. However, it won’t do anybody any good if the trust isn’t properly funded.

Again, funding the trust is simply the process of transferring assets to it. Essentially, you must change legal ownership of your assets from your name into the trust’s name. This also means you’ll have to change most beneficiary designations.

If you don’t properly transfer assets to the trust, you won’t accomplish your objectives, such as avoiding probate. In that case, the disposition of the assets will be governed by your will. For that reason, you might add a “pour-over” provision to your will, directing any leftovers to the trust.

What should you transfer? Some typical examples include bank accounts, securities, real estate and business interests. Generally, you can transfer these assets with little difficulty, although real estate may require some additional footwork. Using an attorney is a smart idea.

Certain assets should not be transferred to a trust, such as IRAs and 401(k) plans.  This can trigger unwanted tax consequences.  Again, the attorneys at Legacy Planning Law Group can help.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.