As we have discussed in previous blogs, there are many benefits to having a Revocable Living Trust. These benefits, include for example, better clarification of your intent for asset distribution, avoiding a windfall to your children and grandchildren, more efficient state estate tax planning, and a “stepped-up” tax basis for your beneficiaries.
However, it is also important to consider funding your Trust. The process of “funding” your trust means: changing ownership of your assets to be owned by the Trust directly. Here are four things to keep in mind when considering whether to fund your Trust:
- Funding your Trust is the best way to minimize or avoid the emotional, financial, and logistical hassles of Probate. You have a Trust to benefit your family, and one of the best ways to benefit your loved ones is to help them avoid Probate.
- Generally, funding is only necessary for your “probate” assets, i.e., your home and other real estate, tangible property (cars, boats, etc.), stocks and mutual fund investments, bank accounts.
- Funding is generally not necessary for your “non-probate” assets that have a separately designated beneficiary, i.e., individual retirement accounts (IRAs), 401k/403(b) plans, and life insurance. Keep in mind though that in some circumstances you still may want to consider changing the beneficiary designation on these assets to be in the name of the Trust.
- Funding can be very difficult and challenging (or very simple), depending on how you own your assets. If you have diversified your assets among different institutions, then it may be a daunting task for you to engage and work through the process of transferring ownership to your Trust.
We appreciate those of you who have entrusted Fournier Legal Services with your estate planning. The decision of whether to fund your Trust has complicated legal, tax, and logistical implications. If you have any questions, or if you would like our assistance, please do not hesitate to contact us.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.