Revocable trusts are a very popular and useful estate planning tool, but the trust will be ineffective or non-existent if you do not actually place your assets in the trust (also referred to as “funding the trust”).
Revocable trusts are an effective way to avoid probate and provide for asset management in the event of your incapacity or disability. In addition, revocable trusts – sometimes called “living” trusts – are incredibly flexible and can achieve many other goals, including helping to minimize taxes, prepare for long-term care, and protecting your assets.
However, you cannot take advantage of what the trust has to offer if you do not fund your trust with the assets that need to be protected. If you do not fund the trust, your assets may have to go through a costly probate proceeding in which your assets may be distributed to beneficiaries you did not intend to leave anything to. Not funding your trust can undermine your whole estate plan.
To transfer assets to the trust, whether it is real estate, bank accounts, or investment accounts, you need to consult with not only an elder law attorney, but also your financial advisor. Depending on the institution, they will likely require a copy of the trust in order to ensure the trust is properly funded. This may all sound overwhelming, but with the help of Hegwood Law Group, our full-time Funding Coordinator is here to provide assistance in-house to ensure your trust is funded and your assets are protected.
If you are placing real estate into the trust, you should consult with your attorney to ensure it is done correctly. You should also consult with your attorney before placing life insurance or annuities into a revocable trust, and consult with your attorney before naming the trust as the beneficiary of your IRAs or 401(k) because that could have tax consequences.
Once your trust is fully funded, do not forget about it. When you acquire new assets, do not forget to add them to the trust. You should review your trust annually to make sure everything is titled properly, and no updates need to be made.
If you need assistance establishing a trust or updating your existing estate plan, call the experienced elder law and estate planning attorneys at Hegwood Law Group at (281) 885-8826, or click here to schedule your strategy session today.