Why Your Trust Needs Fuel

Signing your estate plan documents is not the end of the estate planning process. In order for your estate plan to work as intended, it is essential to “fund your trust.”

Funding your trust means either transferring ownership of your assets to the trust during your lifetime (i.e., retitling the assets in the name of your trust) or naming the trust as a payable on death beneficiary on your assets so that the assets are transferred into your trust upon your death.

A good analogy for the importance of trust funding is to think of the trust document as an automobile. The automobile will not operate properly without fuel. Fueling a trust means transferring your assets to the trust so that when you die the assets will be distributed according to the trust provisions and will not be subject to the probate process.

If a person dies owning assets without beneficiary designations totally more than $100,000 or real estate not owned jointly (and not subject to a transfer on death instrument), that person’s estate will have to be administered via a probate proceeding. Probate is an expensive and time-consuming court process. Attorney’s fees, court fees, accounting fees, and bonds required to complete the probate proceeding all add up quickly. Additionally, the average time to complete a probate proceeding is about twelve months but can take much longer if the probate is contested, the estate is complicated, or the court’s calendar is backlogged.

Frequently, clients come into our office to administer a deceased family member’s estate with the expectation that it will be a simple process since the family member “had a trust.” Instead, the client makes the unfortunate discovery that a probate proceeding will be necessary to administer the estate because the deceased family member never transferred any assets to the trust.

The funding of your trust following the execution of the trust document is not difficult. In most cases, it can be accomplished by completing or updating beneficiary forms for your bank accounts, life insurance policies, and retirement accounts. Your financial advisor can assist you with retitling your investment accounts into your trust. Your estate planning attorney will assist you with transferring real estate and business interests (such as interests in an LLC or a corporation) into your trust.

If you have an existing trust, you should confirm that the trust is properly funded so that it will function as intended. If you would like to review your existing estate plan, including trust funding, or if you would like to prepare a brand new estate plan, contact estate planning attorney Jackie Luthringshausen at (847) 705-7555 or jluthringshausen@lavellelaw.com.