What does funding a trust mean when someone signs their trust documents?
Funding a trust ensures that the assets owned by an individual flow through the trust as intended. It involves directing assets or titling them correctly to ensure they pass through the trust according to the individual’s wishes. Without proper funding, assets may not transfer into the trust as planned, leading to potential complications in estate distribution.
Which assets need to be retitled into the trust for proper funding?
There are three types of assets that need to be retitled into the trust: assets that pass by operation of law (such as joint tenancy with the right of survivorship), contract assets (like retirement accounts, life insurance, and annuities), and paid-on-death or transfer-on-death accounts. Properly retitling these assets ensures they align with the trust’s directives for distribution.
What happens if a trust isn’t fully funded upon the individual’s passing?
If a trust isn’t fully funded, the assets that were not properly transferred into the trust may still need to go through probate. Trusts are designed to bypass probate, but incomplete funding can lead to complications in asset distribution. It’s crucial to ensure all assets are correctly aligned with the trust to avoid probate proceedings.
How often should clients review their account titles and beneficiary designations to ensure alignment with the trust?
Clients should review their account titles and beneficiary designations regularly based on two rules of thumb. For younger individuals, a review every five years may be sufficient, while individuals over 60 or 65 may benefit from reviewing every three years. Additionally, significant life events like deaths, relationship changes, or major legal changes should prompt an immediate review of estate planning documents.
What are some common mistakes in transferring assets into a trust that you have observed in your practice?
Two common mistakes in transferring assets to a trust are improper titling and outdated beneficiary designations. Improper titling, such as holding joint accounts that bypass the trust, can lead to assets going to unintended beneficiaries. Similarly, outdated beneficiary designations can override the provisions in a will or trust, causing assets to be distributed contrary to the individual’s wishes.
If someone acquires new assets after creating a trust, how should they coordinate these assets with the existing trust?
For new assets like a home or financial accounts, it’s best to keep them in the individual’s name unless specific beneficiary designations are required. In cases where beneficiary designations are necessary, such as with IRAs or annuities, ensuring consistency between the trust provisions and the designated beneficiaries is crucial for proper coordination of assets.
How can individuals ensure their trust is properly funded if they are unsure of its status?
To ensure a trust is properly funded, individuals should seek professional guidance by consulting with an experienced estate planning attorney. Bringing in their trust documents, wills, and financial documentation for review can help identify any gaps in funding and ensure all assets are aligned with the trust’s directives for effective estate planning.
Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.