Funding the Living Trust

22 Aug

The benefits of forming a revocable living trust cannot be emphasized enough. This is especially true for married couples who have an estate in excess of $ 2M because as of January 1, 2013 (unless Congress miraculously takes action before then), the new estate tax laws will be in effect SUBSTANTIALLY REDUCING the marital deduction.

 

This short article however speaks to the big mistake people make by failing to fund their trust. Forming the trust itself is only step one. Step two requires transferring assets into the trust once it is formed. The benefits of having a funded revocable living trust include:1) it keeps the assets private because no probate court is involved  2) it eliminates expensive will contest proceedings 3) it speeds up the distribution process and 4) for those with just one child it simplifies planning for that child whom they wish to benefit.

 

A living trust therefore is the best means to hold assets for your benefit while you are alive and to specify who gets what when you die. However in order for your estate to enjoy the benefits of this estate planning tool, you must take the additional step of actually transferring your assets into the trust once it is formed. If you fail to the transfer assets you are defeating the whole purpose of the trust because if the trust is not funded, they will pass outside of the trust and possibly wind up before a judge in probate court.

 

Some  types of assets automatically bypass probate court such as life insurance, savings bonds, and jointly titled bank accounts. But if you own real estate as an example or a your own business, a failure to transfer title to the trust may result in these assets being subject to probate court division. this means time, money, and loss of privacy. 

 

Stephen J. Gross is an attorney with 30 years experience handling real estate and business law transactions and litigation including real estate agent/seller non disclosure cases, preparation of trusts and related estate documents, asset protection from judgment creditors for higher net worth individuals, college financial aid planning for people who own investment real estate and/or their own business, and arbitration of shareholder and business partner dispute cases. A free initial phone consultation is offered. To reach us please call 310- 652 8090 and/or visit sjgassociates.com.

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