Estate planning is a powerful tool in your arsenal to ensure that you and your loved ones are protected from any future scenarios. Your estate plan allows you to decide who will make both your healthcare and financial decisions in the event of a crisis. It also allows you, through trust planning, to create a legacy that will provide for you, your spouse, your children and grandchildren, the charities you care about, and your business.
What many of us do not realize, however, is that creating a trust agreement within your estate plan is only the first step. After the trust agreement is created, it must be “funded” to work and reach your goals. This means that your assets and properties must be retitled out of your name into the name of the trust. If you do not take this step, you are at risk that your assets will not be protected within your trust agreement.
We know that this can be a source of confusion and want to make sure you have the information you need to make the right decisions for you and your loved ones. Let us share with you three critical reasons why trust funding is so important to your estate planning success right here in our blog.
1. Funding can ensure your assets are protected in the event of incapacity. With proper funding your assets will be held within your trust agreement should something happen to you. This means that in a crisis the trustee you name will be able to manage your assets and care for you as you instructed in your trust agreement. If your assets are not within the trust agreement, your trustee may not be able to access everything he or she needs to follow your wishes.
2. Beneficiary designations are not an estate plan. While it may seem easier to add a beneficiary to your life insurance or bank accounts, this is not a substitution for an estate plan. Unfortunately, this can often cause more issues that it solves. Know that, first, this beneficiary has no duty to share these assets with other beneficiaries no matter what your estate plan says. Further, complications such as gift tax consequences can arise should your beneficiary try to follow your wishes and give money from these accounts to others.
3. Funding can help to avoid the probate process. One of the main resources for trust planning is to ensure that you can avoid the probate process. If your assets are not funded into the trust, however, you may not be able to take advantage of this benefit. Do not wait to discuss this with your estate planning attorney and make sure you have the protections in place that you need.
We know this blog may raise more questions than it answers. Whether you have a current estate plan that includes a trust agreement or are looking to get started with the right plan for you, we are here to help you. Do not wait to contact our law firm to schedule a meeting with a member of our experienced legal team to discuss this issue issue or any of your estate planning questions with us.