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Trust Funding

Posted by Mona O'Connor | Jun 12, 2020 | 0 Comments

For many people, a revocable living trust is a valuable tool to ensure that their finances are well managed during periods of incapacity and that their loved ones are financially secure upon their passing. However, most people are shocked to learn that signing the trust agreement doesn't end the estate planning process and that they have more work to do. To work properly, the revocable living trust needs to be “funded”.

What Is Trust Funding?

Trust funding is the process of (1) transferring the ownership of accounts and property to the name of the revocable living trust during your lifetime, or (2) designating the trust as a beneficiary of an account, asset or piece of property so that the trust will receive ownership upon your passing.

Trust Funding as a First Step for Trust Administration

Not only does a completely funded trust avoid the dreaded probate process, it can also make the trust administration process much easier.

  • Accessing your accounts and property will be less complicated. If you have properly funded your trust, your successor trustee should have little or no trouble stepping in to manage the accounts and property if you are unable to do so. This can be incredibly important if you are incapacitated and action must be taken right away. Your successor trustee may need to provide third parties with documentation proving their authority to act on behalf of the trust. Our office can easily prepare a Certification of Trust for you so there is no need for court involvement and we can help guide the successor trustee in obtaining the requisite documentation to demonstrate your inability to handle your own affairs.
  • Creating an inventory for your trustee. One of the first things your successor trustee must provide your named beneficiaries at your passing is a comprehensive inventory of all of the accounts and property titled in the name of the trust. If the information gathered during the funding process is kept up to date, you will leave behind a helpful preliminary list for your trustee to use. This can save the successor trustee a lot of time in the beginning stages of administration. 
  • Confidence that your plan will be carried out. It really does matter who/how the owner of an asset is listed. If an account or piece of property is not owned by the trust, the instructions in the trust agreement will not matter. Said another way, the trust agreement only applies to accounts or property titled in the name of the trust. In addition, if an asset has no beneficiary designation and is not held in joint ownership, that asset will have to go through the probate process.  Similarly, if a beneficiary has been named on an account or piece of property, it does not matter what your trust agreement says, the asset will go to whomever is listed on the beneficiary designation. The same is true with joint tenancy. Owning an asset in joint tenancy means that the surviving owner will automatically receive 100% of the account or property upon your death.  If the owner of an account or property is your trust, you have confidence that the detailed provisions of the trust will be carried out after your death. The person you want to get the asset after your death will actually receive it!

Working Together Now for Future Success

By taking the time to create an estate plan, you have demonstrated just how much you care for your loved ones. The last step you need to take is to fund the trust. This is essential step that must be completed as soon as possible after you execute your estate plan. Please give us a call if you have any questions about the funding process. We are available, via telephone call or video conference if you prefer, to assist you in any way you may need. In addition, we offer trust funding services to our clients. Therefore, if you become overwhelmed with the funding process, or you have not taken any steps to fund your trust within six months of executing your estate plan, we encourage you to retain us to complete this crucial step. Let's work together to make sure that your hard work will set up you and your loved ones for a successful future.

About the Author

Mona O'Connor

Mona L. O'Connor joined the firm in 2008 and is currently a partner with O'Connor Law Offices. She is a J.D., C.P.A. and her primary areas of practice include estate planning and trust administration.


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