Revocable living trusts offer many benefits over wills, including asset management and probate avoidance. But even the best designed and drafted trust will fail unless it is properly funded. Once completed, the trust is just an empty vessel until it is filled with your assets.
With a simple will, most of the funding happens through the probate process. You can see some of my previous blog posts about why probate avoidance is preferable for many (in short, probate can be expensive, time consuming, and creates public documents so that anyone can see exactly how much money was in the estate and who received what and when). The funding of a trust, on the other hand, can and should be funded while the trust maker is alive. This assures that assets get in the trust and pass as the trust maker intended. An unfunded or partially funded trust does not avoid probate.
Proper trust funding involves moving assets that are in your name and retitling or reassigning the assets to the trust. Assets generally fall under three main categories:
- Personal property and real property with a title (home, vacation property car, etc.)
- Non-titled property (furniture, artworks, tools, etc.)
- Property that passes by beneficiary designation (life insurance, retirement accounts, etc.)
Most assets should be transferred to the trust as soon after the trust is created as possible. However, an important exception exists for some assets, primarily retirement accounts such as IRAs and 401(k) plans, because of potential tax consequences.
I help my clients through the funding process on a step-by-step and asset-by-asset basis to fully complete the estate plan process so that the final plans will accomplish the goals desired. I can answer any questions you might have about your revcovable trust.
