Now that you have taken the time to create and execute a revocable living trust, you may feel some sense of relief that your estate plan is in place. You have accounted for as many contingencies as you could, including the possibility that you could become incapacitated or pass away.
You were about to put your trust document into a safe place when it became clear that you still had more work to do in order to ensure that your trust does what you intend it to do. You need to fund your trust before it can fulfill your estate planning goals.
Funding a trust is key
When you fund a trust, it means you are transferring your assets into your trust. This may entail changing the names on deeds, accounts and other assets so that the trust becomes the legal owner. You may also decide to change the beneficiary designations on other assets, such as retirement accounts or insurance policies, to reflect the trust as the beneficiary.
Taking these steps ensures that your assets are managed and distributed in accordance with the provisions of your trust. It also means that those assets do not go through probate or incur estate tax. If you become incapacitated, your successor trustee can (hopefully) step into his or her role to manage the assets without much trouble.
Why do you need to fund your trust?
In case you have an hesitation about going through this process, here are the reasons why doing so is crucial:
- An asset not in your trust at the time of your death may have to go through probate.
- An asset not in your trust is not subject to the terms of your trust.
- An asset not in your trust could end up distributed to someone you did not intend to inherit it.
Moreover, if you become incapacitated without funding your trust, your family may have to go to court to obtain the right to manage your assets. Moreover, if you don't fund your trust, you wasted the time, money and effort you went to in order to draft and execute the document. This may seem like a daunting task, but you don't have to do it alone. You may tap into local resources to guide you through each step of the process to make sure that it is done correctly so that your rights, and your assets, remain protected.