Estate Planning Pitfall: Proper Funding of your Revocable Trust

Brooke Stephenson Barden

A revocable trust, also referred to as a living trust, is a great tool to manage assets during your lifetime and avoid the probate process at your death.  The trust administration process following your death can be more streamlined for your beneficiaries, as compared to the probate process, because it allows for privacy and avoids probate taxes and other costs of administration.  However, the key to unlocking the benefits of a revocable trust is to properly fund the trust during your lifetime.

Funding your trust simply refers to the process of transferring ownership of your assets to your trust, or in some cases, designating the trust as the beneficiary.  It is important that you speak with an experienced attorney and your financial advisor about which assets should be transferred to the trust as it can create unintended tax consequences.

Estate Planning

If you don’t properly fund your trust during your lifetime, then you will not achieve the objectives that can be accomplished from a revocable trust, particularly with respect to avoiding the probate process.  If assets are not transferred during your lifetime, then they can become estate assets and will have to go through the probate process before they reach your beneficiaries.

Additionally, many people are diligent about funding their trust at the time of creation of their trust, but they fail to properly manage it once they acquire new assets.  Again, if the new assets are not titled in the name of the trust then you will not reap the benefits a revocable trust can provide your beneficiaries.  Individuals should complete an annual review of their trust assets and ensure that all trust assets are properly titled in the name of the revocable trust.

For assistance in drafting a revocable trust or a review of managing your trust, contact our office for a consultation.  We look forward to assisting you with achieving your estate planning objectives.

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