By Attorney Garrett T. Smith
The new year is a great time to evaluate our goals and desires! Our desires are reflected in our actions. Our goals can give us a vision of what we want to accomplish and provide us with the focus to transform our desires into reality. The goals we make could be physical, spiritual, mental, financial, emotional, or a combination of some, or all. During this time of self-reflection, it is also a good idea to do an inventory of your legal documents to make sure your goal of probate avoidance is still intact.
Funding a trust simply means transferring your assets into your trust through changing ownership or beneficiaries depending on the type of asset.
Changing Ownership. The most common asset that requires changing title is your home. Upon the passing of the surviving spouse, the heirs are unable to sell the home because a probate is required to transfer title from the dead to the living. If title were transferred to the trust, the successor trustee can step in to maintain or sell the home without court involvement.
When reviewing estate plans, I often find the home is not owned by the trust because the prior attorney did not fund the trust, or the client purchased a new home without titling it in the trust. I had a client approach me after her mother passed away, asking why the county recorder said a probate was required. Her mother’s trust was well-written, but the home was never transferred to the trust. Even a well-written trust, if empty, is worthless.
Changing Beneficiaries. Beneficiaries of bank accounts, life insurance policies, and investment accounts matter. I had a client who wanted to set up an estate plan for her father after they returned from a family vacation. Her father passed away while she was gone and her whole family came back from their cruise early to take care of the funeral and expenses. There were only a few thousand dollars in the bank, but my client spent more than half of the account in court costs and legal fees to get access to the funds.
Making your trust the pay-on-death beneficiary of your bank accounts is simple and makes it much easier for your heirs to access and distribute. A spouse should generally be listed as the primary beneficiary of a life insurance policy with the trust listed as the contingent beneficiary. This is extremely important if you have minor children. You have to be careful with retirement accounts because there are penalties for early withdrawals, and you do not want to list the trust as a beneficiary if it will incur taxes and penalties.
To receive the benefit of your trust, it must be funded! If you have questions about your trust funding or would like to establish a trust, please give me a call!