22 May What does it mean to “Fund your Trust”?
You created a trust, now what?
Review of the Funding Process
Most people think that once they have created their estate plan and trust, they are DONE. On the contrary, that is when the real work begins. So, what happens after the trust is signed?
The process of creating an estate plan is a two step process. The first step is the actual creation of the estate plan. Once the documents are signed and your trust ‘comes to life,’ it is time to start the second step, called “funding the trust”.
I always like to describe the estate planning process using the example of a basket. Essentially, during the first step, we create a plan for what will happen when a person is incapacitated or passes away. We create the basket. The basket can be any shape, size, color or texture the person likes. It is a comprehensive estate plan especially drafted for the person, their financial situation, family structure, needs and desires. The person will hold onto this basket during his or her life.
Once we have created the “basket” we move forward into the “funding phase” or what I like to describe as “filling up the basket.” Funding your trust is the process of transferring your assets from you to your trust. To do this, you physically change the title on certain assets to the name of your trust. Essentially, you fill up your basket with your valuables and continue on with life. But, not all of your assets go into the trust. Depending on the type of asset and type of estate plan, we may advise you to NOT transfer a certain asset into your trust.
One of the objectives of creating a trust is to avoid probate. The goal is to not have any assets in your name at the time of your death. Well, if you don’t fund your trust with your assets and they remain in your name, you have NOT reached that objective of avoiding probate. Your trust can only control assets that are in it, therefore if you want an asset to avoid probate and go straight to your loved ones, create a trust. Contact our office and we can assist you with the creation and funding of a trust.
We help our client create the basket and fill it up with the necessary valuables. If you have questions regarding funding your trust or would like to establish a trust, contact our office for a free consultation.