You are not alone — most of the people I meet who have a living trust have never gotten around to “funding it” fully. That’s mostly due to the fact that so many attorneys do not assist them, and most people are either too busy or don’t want to fill out all the forms required at each financial institution. This is a critical step in estate planning, however. If the trust is not funded, then the assets left outside the trust may end up in probate!

What Assets Should I Put In My Trust?

The general rule of thumb is “everything” unless there’s a reason to leave it out. For example, retirement accounts such as IRAs and 401(k) plans cannot be transferred to a trust without triggering all the income tax immediately. Employee benefits cannot be transferred to a trust because the trust is not an employee. The assets outside the trust usually avoid probate anyway because they allow you to name a death beneficiary. Be sure to do that!

Why Not Just Leave Small Bank Accounts Out of the Trust?

When you leave a small financial accounts outside the trust, they normally avoid the probate process because they don’t add up to more than $150,000. However, the trustee must wait 40 days after death and have proper legal paperwork (usually prepared by an attorney) to present to the bank. Imagine paying an attorney $200 to prepare paperwork to collect a $200 bank account.

Why Put My Personal Possessions in the Trust?

If the assets outside your trust exceed the value of $150,000, they go to probate. So, if they’re outside of the trust, we may have to have them appraised to find out what they’re worth. Technically, the trustee must wait 40 days after your death before taking possession of them. Why not just assign them all to the trust and avoid the headache?

Will My Bank Account Numbers Change?

Funding can be the most challenging part of completing your trust because YOU may have to educate your financial institutions. For example, some banks may tell you that you must close your old account and open a new account. This is ONLY necessary if you are changing the social security number or tax ID number associated with the account. Since your trust uses YOUR social security number, it’s almost NEVER necessary to change your account numbers or reorder your checks!

 

Don’t be caught with an unfunded trust. To learn more or download our trust funding package, go to www.YourLegacyLives.com.