Updated: Jul 10, 2020
Like a subway, a trust is a vessel meant to transport your assets in an efficient manner to the individuals of your choosing. Many choose to include a trust in their estate plans to avoid probate and maintain privacy. When set up correctly, a trust can accomplish these goals with ease. However, if set up incorrectly, a trust is essentially useless.
If you opt for a trust as part of your estate plan, remember that the process is twofold. First, you and your estate planning attorney go over the terms and design of your trust. Once finalized and executed, the trust is ready for funding. This second step is critical to receive the benefits of a living trust.
You may be wondering what does it mean to 'fund' a trust. Simply put, you fund your trust by updating title of your assets to the name of the trust. The example below illustrates the funding process in more detail.
Example: With the help of her estate planning attorney, Jasmine has created a revocable living trust. She owns a piece of property that she would like to pass down to her sister and wants to ensure that the property does not go through probate. Jasmine works with her attorney to prepare the paperwork required to change the property title from her name to the trust's name. Jasmine has now funded her trust. Jasmine is still able to use the asset as before, and she has peace of mind that her estate plan will go accordingly.
If you fail to fund your trust, probate will be required to transfer assets to your heirs. This is unfortunate for those who created their estate plans with the best intentions only to have the plan fail. Further, the combined costs of creating a trust and then having to go through probate can add up very quickly. If you decide to include a living trust in your estate plan, ask your attorney about the funding process and whether that is included in your agreed upon legal fee.
Disclaimer: The purpose of this post is to provide general information and a general understanding of the law, not to provide specific legal advice. By accessing this blog site you understand that there is no attorney-client relationship between you and Sekhon Law, PLLC. This post should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.