So you have decided to have a trust created. But then you hear someone state that you needed to “fund” your trust. What exactly does that mean?
To “fund the trust” means that your assets have been transferred to your trust. This may require a deed, an assignment, a beneficiary designation, or a change in title. Examples may include: (a) deeding your residence to the trust which then shows the trust as the owner of the residence; (b) assigning your personal property (like jewelry household furnishings, etc.) where the trust becomes the owner of such items; (c) changing the secondary beneficiary of your IRA to the trust to receive the IRA proceeds after the death of your spouse; and (d) changing the title of your banking accounts, your brokerage accounts, and other similar accounts to your trust so that the trust is considered as the owner of these accounts.
When all of the foregoing has been accomplished, then it is important to step back and ask this question; “Have I forgotten anything?” Some recent cases of mine have highlighted the importance of asking that question.
In one case, the decedent was a plaintiff in a lawsuit to recover an investment. But upon the decedent’s death, someone needed to be appointed by a court to act for the decedent. Thus, a probate was required to have such a person appointed. What if the action was commenced in the name of the trust, would the probate have been avoided? Yes, if the decedent’s claim was assigned to the trust prior to death and the lawsuit was commenced on behalf of the trust.
Another example involved a joint tenancy with right of survivorship in a residence. The spouse died, followed a few months later by the other spouse. A probate had to be opened for each spouse to have someone appointed to sign the necessary deed and documents to transfer title. Could this have been avoided? Yes, if the residence had been owned by one or both of the spouses in a trust – and yes, they even each had a trust.
So, to “fund the trust” is a very important and critical step in the estate planning process. How are you doing?
Contributed by Morris Hall, PLLC Phoenix estate planning attorney and partner, W. Durrell Nielsen.
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This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.