To achieve full benefit from a living trust, it is important that appropriate action be taken to transfer assets into trustee ownership. This process is often referred to as “funding” the trust. Any asset that is transferred to your trust while you are living does not go through the probate court upon your death, but instead, passes under the terms of the trust in a private manner. Therefore, funding your Trust can save your family lots of time and money in administering your estate!
Funding a living trust consists of the following:
- Retitling your bank accounts into your name as trustee of your trust
- Retitling the deeds to real estate into your trust name
- Retitling stocks, bonds and investment accounts into your trust name
- Retitling business interests into your trust name
- Naming the successor trustee of your trust as beneficiary on life insurance policies
- Naming your successor trustee as beneficiary of annuities
- Naming your trust as beneficiary of retirement benefits, if appropriate. There are income tax consequences to be considered, so this should be discussed with me or your tax advisor.
There can be other unintended consequences of not funding your trust. For instance, if life insurance is payable to a minor, a conservatorship will need to be established through the probate court and the life insurance company will pay out to the conservator, and not to your successor trustee. Your trust may say to hold funds for your children until they are 30 years old, but the conservator can only hold the funds until your child is 18 years old and then the whole ball of wax is turned over to the child! Not to mention the added time and money spent on hearings and accountings to the court.
Please make sure you haven’t set up a beautiful revocable living trust that is an empty shell. You can make an appointment with me at any time to review the funding of your trust and make sure you are on the right track.
If you have any questions, please call Karen L. Stewart, Attorney and Counselor at (248) 735-0900.
For more information, please see my website, customestateplans.com.