The Gaping Hole in Your Estate Plan
You’ve established your estate plan, which included hiring an attorney, making difficult decisions, and executing your documents. You breathe a sigh of relief because you are “done” and can now forget about it and move on with your life.
You assume that because you’ve hired an attorney to draft your trust documents, then signing them completes your estate plan.
Alas, this is not true.
In order for the trust to be effective (i.e. avoiding probate, your beneficiaries to receive the gifts you designated for them), you must complete a process called “funding” your trust. This is the process of actually transferring your assets into the trust.
If you don’t “fund” your trust, your entire estate plan can be worthless.
Many times, those who choose to fund their trusts on their own sometimes skip this process altogether because they don’t understand it, they procrastinate, or they had an attorney that did not fully explain the process or its importance.
Your living trust can only apply to the assets you put into it. Leaving assets outside of your trust can subject them to probate, which defeats the point of it all.
So “funding” your trust involves changing the title of your assets from you as an individual to your trust. Yes, you always maintain 100% control of your assets during your lifetime. You can buy and sell assets just as you did before. Anything you put into your living trust can always be taken out.
Changing the name of your assets is generally straightforward, also. It can include filling out forms with your brokerage or bank, or changing the title to your house with proof of your current trust. When we prepare estate plans for people, we provide our clients with specific and detailed instructions on how to fund their trusts, and which assets should be transferred and which assets should remain outside of the trust. We also provide our clients with the option of having our office assist with initial funding efforts.
While estate plans, including those prepared by MEHTALEGAL, can include safeguards to protect improperly transferred assets, the best way to accomplish your estate planning goals is to properly fund your trust shortly after it is created. Also, periodically check whether your assets have been transferred whenever they have been modified i.e. refinancing of real property or opening of new accounts. An attorney can assist you with this.
Regardless of whether you decide to fund your trust on your own, or request that an attorney assist you with the funding, make sure you complete this critical, yet often overlooked step of your estate plan.