Revocable living trusts have become a popular tool in estate planning. Many individuals are now turning towards them rather than depending solely on wills. The preference for trusts often arises from the autonomy and security they provide. With the ability to sidestep the extensive procedure of probate, a trust holds an edge.
Furthermore, revocable living trusts come with the versatility of safeguarding provisions for spouses without compromising the interests of children, a feature that becomes particularly valuable in scenarios of successive marriages. Beyond avoiding estate taxes, these trusts play a crucial role in protecting the inheritance of children and grandchildren against potential risks like creditors, unforeseen marital disputes, ill-advised financial decisions by beneficiaries, and more.
However, merely having a trust isn’t enough; its effective use is equally crucial. An unfunded trust could inadvertently lead your assets into the probate court.
The Mechanics of Funding a Trust
So, what does “funding a trust” entail? Essentially, it involves transitioning your assets into the trust. This means that the ownership titles of your assets, which may be under your personal name or jointly with a spouse, need to be altered. The new titles should reflect the trust as the holding entity.
A common query that arises is about the control of the assets. The beauty of a trust is its customizable nature. You can designate yourself as the trust’s trustee and decide on a successor trustee who would assume control post your demise. This ensures that you maintain control over the trust during your lifetime. To highlight some aspects of a revocable living trust:
- You have the liberty to be your trust’s trustee.
- Transactions, like buying or selling assets, remain as straightforward as they were before the trust.
- The “revocable” nature means you can modify the trust whenever you wish.
- There’s always the option to extract assets from the trust if you so choose.
The Imperative of Trust Funding
The protective cloak of a trust only extends to assets that are formally within its realm. Simply put, only assets that have been officially transferred or “funded” into the trust enjoy its benefits. Setting up a trust without retitling assets or amending beneficiary designations renders the trust ineffective. Such overlooked assets will remain outside the trust’s jurisdiction, and in unfortunate circumstances, they might not evade probate.
In scenarios where certain assets aren’t transferred to the trust before one’s passing, attorneys usually draft a “pour-over will” as a contingency measure. Think of this will as a backstop; it captures any overlooked assets upon one’s demise and funnels them into the trust. Though these assets might still undergo probate, the advantage is that they’ll be managed and distributed according to the trust’s directives.
To sum it up, while setting up a trust is a commendable step in estate planning, the true power of a trust is realized only when it’s properly funded. For any further assistance or clarification regarding trusts, feel free to reach out to Law Offices of Terrence Fantauzzi at (909) 552-1238.