The Mistake of Creating a Revocable Living Trust, but Failing to Fund it
A revocable living trust is a great instrument to use in your estate planning, but simply creating and executing the trust is not the only step in the estate planning process. You must make sure that all of your assets are re-titled into the trust’s name in order to enjoy all of its benefits. Also, you should revoke any prior trusts so there are no issues with the administration of multiple trusts upon your passing.
Funding a revocable living trust may be a tedious process, but it certainly needs to be done quickly and properly. Most estate planners will advise you of the funding process and/or provide you with a funding letter, but few will actually do it for you. Therefore, you must be aware of the importance of funding as well as the process to ensure that your estate plan is complete. Funding your revocable living trust could mean changing the name on your bank account and/or brokerage account to the trust’s name (which will usually be indicated inside of the trust document). Funding the revocable living trust could also include changing certain beneficiary designations on life insurance policies and/or other financial planning accounts. Funding may mean something different for every person.
The downfall to not funding your revocable living trust is that your assets remain in your individual name and may need to go through probate (which is what you hoped you would avoid). That means, while you probably created a revocable living trust for the purpose of avoiding probate, these individually titled assets will actually have to go through probate to reach your trust using your pour over last will and testament. Although the assets will inevitably reach the trust, this may not be the route you intended when you created your estate plan.
Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.