If you’re learning about
trusts, powers of attorneys, and other such terms have probably come up in your
research. You may have read about how some people choose to add a
revocable living trust to their estate planning documents rather than relying solely on a will
because trust allows them to save money on
probate fees and have more control over their assets.
But the benefits of a revocable living trust done stop there. A living
trust, when prepared properly, can help estates avoid the costly, protracted,
court-supervised process of probate. A trust also makes it so beneficiaries
can have access to their inheritances much faster since trusts are not
subject to probate.
If you’re in a second marriage, a trust can also help you provide
for your spouse without disinheriting your children from a previous relationship,
which can be extremely beneficial when you’re in a blended family.
What’s more, trusts can protect children’s and grandchildren’s
inheritances from creditors, new spouses, divorce, the courts, and from
heirs who have bad spending habits.
What it Means to ‘Fund’ a Trust
When you “fund” a trust, you’re transferring assets into
the trust. They originally belonged to you, but you’re actually
going to change the titles of the assets so they are no longer in your
name or joint names if you’re married. You’ll be physically
changing the titles to the name of the trust. If you have
beneficiary designations, you’ll probably change those to the name of the trust as well.
“Who controls my trust assets?” You can control them while
you’re alive and name a successor trustee to take them over after
you pass away. Or, you can name someone else to handle them while you’re
alive, though you’ll probably want to be in control. The beauty
of a revocable living trust is you can change it at any time. For example,
you can keep buying and selling assets as you already do. And if you decide
to, you can take assets out of the trust at any time.
Why Is it Important to Fund My Trust?
It is very important to fund your trust. If you do not change titles and
beneficiary designations and you pass away, those assets will be subject
to probate. You can set up a great trust, but it only works if you fund
it. Unless you fund the trust, it can’t control what happens to
your assets. If your intention is to avoid probate when you die, you want
to fund your trust right away, while you still can.
When you create your trust, your attorney will create a “pour-over
will,” which is a safety net. If you die, the will “catches”
any assets that you didn’t place in the trust and it sends them
to it, however, they will most likely go through probate first, but once
they get there, they’ll be distributed according to the instructions
you left in your trust.