Estate PlanningTrustsWills

The Importance of Funding

There are many ways to craft an estate plan for an individual or family. The basic building blocks consist of powers of attorney, healthcare directives, guardianship planning, and will(s) and/or trust(s) to direct where your stuff goes when you pass. Which tools should be used in a specific case really comes down to the customers end goals after a strategic planning meeting with an attorney. One thing is certain, however, regardless of which tools you incorporate into your estate plan, they mean nothing if you have not properly structured your assets.

For wills, this usually means exercising diligence in maintaining your TOD and POD designations, filing a beneficiary deed for your real estate, and perhaps adding joint owners to certain assets.

With trusts, estate planning is very similar. TOD's and POD's can still be used, but you also have the option of funding the trust directly with your assets. Funding happens in many ways, like when you use a general warranty deed to transfer real property, retitle the ownership of bank accounts, and/or transfer membership interests if you own a business into the trusts name. There may be certain items you would not want to transfer, such as automobiles, IRAs, 401(k)s, and other interests due to potential negative consequences; you should speak with your lawyer about these before transferring them.

One common pitfall I encounter with customers who previously set up their trusts through  an online service, or unfortunately an inexperienced lawyer, is they fail to "fund" the trust. Funding the trust simply means changing ownership from "me" to "my trust". Failing to fund the trust is a mistake that could render a big piece of your estate plan worthless.

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