The Biggest Mistake People Make with Living Trusts
You met with your attorney, set up a revocable living trust, signed all the papers and left the attorney's office with your portfolio. You're done, right? Unfortunately, you're not. This is when the second phase - the funding process should start. Funding is where many drop the ball. They return home and the impressive-looking estate planning portfolio ends up forgotten on a shelf. It stays there collecting dust until one spouse dies.
Then, all too frequently, the grieving family discovers there are assets titled in the decedent's name that were never transferred into the trust. Now, the already distraught family learns that, in order to transfer title to those assets, someone has to go to the courthouse, file the pour-over will and open a probate estate. The personal representative appointed by the court must notify beneficiaries, publish a notice to creditors in the newspaper, and spend a year or more to clear title and transfer the property. This is the last thing a grieving spouse needs.
Funding your trust
I've seen the above scenario happen far too many times. The saddest part is, it is completely avoidable. To prevent it, when you leave your attorney's office with your new estate planning portfolio, start work on funding your trust and realize that funding is a lifelong thing. It is easier than it sounds. Funding is simply the process of transferring your assets to your trust. Some attorneys help you get started by transferring your house into the trust once it is created. At my office, we help you transfer your residence and any other real estate you own in the Carolinas into your trust. Then we provide detailed instructions for transferring other assets like bank accounts, investment accounts, and even your vehicles. We are available to answer questions and to communicate with your financial advisor and CPA. This teamwork is essential to properly funding your trust. Everyone has a vital role to play in funding your trust. The goal is to ensure nothing is accidently left out of the trust. Make sure your attorney communicates with your financial advisor and CPA so everyone knows the game plan and nothing falls through the cracks.
Whenever you acquire new property, you should decide whether you want to purchase it directly in the name of the trust as trustee, purchase it in your name, or transfer it into your trust later. Your trust can also be the beneficiary of certain types of accounts. This process also is easier than it sounds and it becomes second nature. It is also crucial to getting the full benefit of your trust.
One of the reasons people establish trusts is to keep their estate plan private, make things easy for their surviving family, and avoid court intervention in the process of transferring assets to beneficiaries. When assets don't get transferred into the trust and there is an unexpected probate, you don't get what you paid for.
Successful Estate Planning
What should happen when you leave with your new estate planning portfolio? For a successful estate plan, funding should be a fluid, on-going process as it is with your investments, and tax planning. No one expects to buy stocks once and forget it. People review their investments periodically and that is also a good time to review your estate plan. Is it still what you want? Have your kids grown up? gotten married? Your life changes, your family changes, and you are constantly opening new accounts, buying new stocks, up-sizing for a growing family, or down-sizing when the kids are grown. All of these things affect your estate plan. Fund your trust as you buy and sell property over your lifetime so you don't leave your family a a probate mess when you're gone. If you need help funding your new trust or figuring out where you are funding your old trust, give us a call at 704.887.5242 or fill out the contact form below.