The idea of creating a trust in lieu of a will is appealing to many people when it comes to estate planning. Trusts have several benefits, one of which is that the person’s assets go into a trust and are then distributed to beneficiaries outside of the federal estate tax provisions. Trusts also allow estates to be handled outside of probate court, making the process much smoother for all involved. In addition, trusts give people more flexibility when it comes to distributing the estate amongst their children or grandchildren than a simple will. Many people operate under a misconception that once the trust is executed, they are fully protected. However, once the trust is written, the work is far from done.
The next and most important step that needs to happen following a trust’s creation is funding the trust. If you want your assets protected, you need to be sure that your assets are actually going into the trust to accomplish this goal. Otherwise all you have is a signed document. Your trust is essentially an empty bucket. The structure is there, but no water is inside.
So how is this done? Property that is titled in your or your spouse’s name(s) needs to be re-titled to “the Trust of X and Y” or “The X Family Living Trust” (insert your name here). This includes your home, bank accounts, and any other financial accounts you have. Many trustors wish to have all of their assets funneled into the trust, including life insurance policies, and for this purpose it is recommended you consider having your secondary beneficiary of your life insurance policy be your trust. You may also choose to name the secondary beneficiary of any financial or retirement accounts your revocable trust. All this means is the proceeds of these polices would be put into the trust account and then distributed to your trust beneficiaries by the trustee.
As an estate attorney, I like to work closely with my client’s financial advisors, accountants, etc. to ensure that the trust is properly funded and that all financial decisions are being made for the benefit of the trust. I also regularly follow up with my clients to ensure that any property that is acquired later, following the trust signing, is also included in the trust. One of the biggest mistakes clients can make is to purchase a new piece of property and never fund it into the trust. If the owner of the property dies before funding the property into the trust, that piece of property will need to go through probate, which avoids the whole point of creating a trust.
Your trust is a living document. It takes more than simply signing your name on the dotted line and assuming everything else will work out. Make sure you are carrying around more than just an empty bucket.
At Sullivan Law, we offer estate planning packages at a flat and reasonable fee. We also offer free consultations to discuss what your needs are, what you would like to do, and how that can be best accomplished. Everyone’s needs are different, and your wishes should be clearly listed and understood.
Call us at 248.917.1351 or email at asullivan@sullivanlawonline.com to schedule your free consultation today. We look forward to working with you!