Securing Your Estate Plan: The Vital Role of Funding

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Estate planning is more than just creating documents; it’s about ensuring your plan works as intended. This lesson was learned the hard way by Ted and Emily. They had diligently met with an attorney, discussed their family’s needs, and crafted an estate plan centered around a Revocable Living Trust. They believed their work was done after executing the necessary documents – the Trust, Property Power of Attorney, Health Care Power of Attorney, and a Pour Over Will. However, Ted’s passing revealed a critical oversight: the Trust hadn’t been funded.

Funding a Trust is essential, as it is the process of transferring the title of assets into the Trust. Without this step, a Trust is like an empty chest; it holds the potential but not the value. In Ted and Emily’s case, certain assets passed to Emily as the surviving joint tenant or through beneficiary designations. However, assets solely in Ted’s name had to undergo probate – a public, sometimes cumbersome process. The probate process transferred these assets through Ted’s Pour Over Will into the Trust, but this could have been avoided with proper funding.

Funding involves re-titling assets into the Trust’s name. A knowledgeable estate planning attorney can guide which assets should be transferred and how. Generally, most assets are transferred into the Trust, with exceptions like:

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– Retirement Accounts: Due to potential negative tax consequences, these are usually left out. Beneficiary designations might be changed to the Trust under certain conditions.

– Custodial Accounts: Such as UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act) accounts.

– Life Insurance: Sometimes, placing life insurance in a special irrevocable Trust can be beneficial for estate tax purposes.

– Motor Vehicles: Depending on state laws, these may be better off outside the Trust.

– Checking Accounts: Keeping a small, operational checking account outside the Trust can be practical for daily transactions and privacy.

Homeowners should note that refinancing often requires removing the home from the Trust. Your attorney can assist with this, ensuring it’s transferred back into the Trust after refinancing to avoid probate issues or disrupting your carefully laid plans.

In conclusion, both planning and funding are critical to an effective estate plan. They work hand in hand to ensure your goals are met and your legacy is secured as you envisioned. Engaging with a competent estate planning attorney who can guide you through both steps is essential for the success of your estate plan. Schedule your free one-hour personal consultation.

From the desk of Attorney Brandon McGee, McGee Law Firm

Brandon McGee
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