THE fact that a lot of existing Living Trusts are not properly funded is a scare to behold. Once your Living Trust was drafted and finalized, you think your assets and loved ones are safe and protected from the dreadful process of probate.
Absolutely not at this point! Not until you have funded the trust.
The trust must be funded: assets must be transferred in the name of the trust. This is a very important step that, most often than not, gets neglected.
Funding your revocable living trust with bank and investment accounts, stocks, business interests and real estate and updating the beneficiaries of your life insurance and retirement accounts are the next crucial steps. In fact, funding is just as important as setting it up. But why?
There are two main benefits of using a revocable living trust as the foundation of your estate plan: (1) Having a disability plan in your trust will allow your family to avoid guardianship and conservatorship if you become disabled; and (2) Assets titled in the name of your trust at the time of your death will allow your family to avoid probate after you die.
Thus, if any of your assets haven’t been funded into your trust and your beneficiary designations haven’t been updated, then upon your disability or death your revocable living trust will be completely useless.
The key is to get your assets into the trust and the beneficiaries updated while you’re alive and well – this is the only way to insure that the disability trustees you’ve named in the trust can manage, invest and spend your assets for your benefit if you become disabled, and the administrative trustees you’ve named in the trust can manage, invest and distribute your assets for the benefit of your beneficiaries after you die.
Think of your living trust as a bucket that holds title to your real estate and money accounts. The trust language identifies who is to manage your assets and what they are to do if you become incapacitated, and also who is to receive your assets after you’re gone.
If you don’t transfer your assets to the trust while you’re alive and competent then the probate court has to do it for you before the terms of your living trust can control the disposition of your estate. How do you know that this is the case? If your assets are in the name of your trust, this will show up on the statements that you receive.
For example, your bank statements will be labelled as the Juan Dela Cruz Trust, with you listed as the trustee. This means that you retain the control during your lifetime, and upon your death control reverts to the trust. Neglecting to label new assets in this way can send your estate to probate.
Every time you gain an asset, you have to remember to title the asset in the name of the trust, which will keep your assets from being subject to probate after your death.
NOTE: Evangeline is not an attorney nor does she provide legal advice. She can, however, provide legal information to assist clients make informed decisions to represent themselves (in pro per). She is a Legal Document Assistant (LDA # 397, registered and bonded in Los Angeles County, expires 3/23/2013) and prepares legal documents only at the specific direction of the client. A client is advised to consult with a lawyer if they don’t know what legal course of action to take.
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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323) 550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).
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Note: Evangeline is not an attorney nor does she provide legal advice. She is a bonded and registered Legal Document Assistant and prepares legal documents per the specific direction of clients.