One of the primary reasons people create a trust is to avoid probate. A revocable living trust is the most typical trust used to ensure that your wishes are carried out. But sometimes this well-intended plan falls short if the trust is never funded.
I always tell clients that their estate plan is not done upon signing their trust. The next steps are the absolute most important steps someone should take if they have created a trust. It is not uncommon for people to think that the trust document lists what assets are part of the trust. But attaching a list of assets to your trust will not avoid probate. You must fund your trust if you wish to avoid probate and have your assets governed by the terms of your trust. So how is this done? There are two ways you can ensure that your assets go into your trust.
You should first make a list of every financial asset or policy that you have such as bank accounts, money market accounts, cd’s, savings accounts, IRA’s, Roth IRA’s, retirement accounts, brokerage and investment accounts, annuities, and life insurance policies. You then can choose one of the options below.
Option 1 – Change Ownership to Your Trust. If you put your assets in your trust now, those assets will not go to probate at your death – because the assets are owned by your trust and not you individually. You will have to complete forms for each financial asset you own to change ownership from yourself to your trust.
Option 2 – Name Your Trust as Beneficiary. If you don’t want to change the owner of your assets to your trust, then you can complete forms for most financial assets that a person typically owns to state that upon your death the asset should go to your trust. The change of ownership to your trust will be triggered by your death.
You should not select an option or engage in funding your trust without good legal advice. There are recommendations for every type of asset you own that should be carefully considered including the tax consequences of each option and especially for retirement accounts. Further, you will want to make a list of all real estate interests you have and work with an experienced professional to determine whether you should put your property in your trust or keep it in your name with an enhanced life estate deed (commonly referred to as a ladybird deed) to avoid probate.
We are always willing to assist with the trust funding process to help ensure that your estate planning goals are met, and probate is not something that becomes familiar to your family.