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Properly Funding Your Trust: Don’t Leave Your Loved Ones Behind
You’ve put in the hard work. You’ve set up a trust and you’re well on your way towards protecting your family’s future. Or are you? There are many steps when it comes to establishing a trust and one of the most important is also one of the most easily overlooked: trust funding. Simply put, if your trust isn’t properly funded, then you’re leaving your family hanging.
The Importance of Properly Funding Your Trust
There are several reasons why it’s dangerous to leave your trust improperly funded, but the first reason is probably the most obvious. If you haven’t transferred an asset to your trust, then it IS NOT in your trust and will not be governed by the terms of your trust. This means that your trustee has no authority to give that asset to the beneficiary you named in your trust. As a result, your hard-earned assets might end up going to someone you didn’t want to have them.
Another reason why it’s important to fully fund your trust is to avoid probate. One of the chief reasons why people set up a trust is to avoid the lengthy and burdensome process of having to go through probate court. Any assets that you don’t include in your trust by funding it into the trust will likely be subject to probate and defeat the point of setting up the trust in the first place.
Trust Funding 101
When it comes to funding your trust, there are several important steps you’ll need to take. The most significant of these steps is a process known as making ownership changes. This means that you’ll change the ownership title of most of your assets from your own name to that of the trust. In the case of some assets, most notably retirement accounts and life insurance policies, the process will be slightly different. Rather than transferring these assets over to the trust, you’ll complete beneficiary designations, an arrangement which allows these assets to go straight to your intended recipient after you pass. In some cases, especially if your trust provides for your beneficiaries to receive your assets in trusts you set up for them after you pass, the beneficiary designation should be THEIR trust instead of naming that beneficiary individually.
Once you’ve set up and fully funded your trust, you’ll want to review it every couple of years. This ensures that your assets are still set to go to the beneficiaries you want to receive them. If you have any major life changes, it’s important to look over your estate plan right away and update your beneficiaries accordingly. You don’t want a new grandkid to get cut out of your estate, just as you don’t want a friend you’ve had a falling out with to receive your hard-earned assets!
Updating your estate plan can be a complicated process as it involves a sometimes head-spinning number of documents. That’s why hiring an experienced estate planning attorney is such a necessary step. At the Law Firm of Blanche D. Smith, we’re here to help. Contact us today to start planning your future and protecting your loved ones.