Crenshaw Peterson & Associates PC
|Posted on October 13, 2014 at 4:30 PM|
Common Pitfall #3, Funding incomplete, or done improperly.
For those out there who already have an Estate Plan put together, let's talk about funding.
Funding is what we use to describe the process of titling all your assets correctly and in conjunction with your Estate Plan. For those with a Trust, this is even more important! The Trust is written on paper, usually a lot of paper, but just paper. It's only as good as what you put into it. Many times we use the bucket example. Having a Trust is like owning a bucket, you are the holder of the bucket and your assets are held within the bucket. The Trust itself, is the outline of the bucket, but we have to put your assets inside the bucket for it to work effectively. Unfortunately, we see all too often, clients who have not 'funded' their Trusts. None of their assets are titled in the Trust, nor are beneficiaries listed as the Trust. So the Trust, is effectively, worthless at death. It's not worth the paper it was written on. Clients came in and we drafted and sign Estate Planning documents and they get a pretty portfolio book with directions for when they leave my office, and then the client leaves my office. After leaving, the portfolio gets put on the shelf, or in the safe and they don't look at it again, forgetting all about their "homework."
The family then comes in after the clients death and it's hard for them to understand why it isn't an easy Trust Administration. Why does it take so long? Why do we have to go Probate Court? Why are there Court fees?/legal fees? It's frustrating to them to have more work to do than they had expected because their parent or sibling had an Estate Plan. But asset titling is just as important as the Estate Planning.
What this means, is that people NEED to take the time to transfer their assets in accord with their documents and their planning goals. Individuals need to contact their retirement fund companies and get beneficiary changes made. Beneficiaries on Life insurance policies need to be updated, along with Bank accounts, and investment portfolios. A new deed needs to be executed to fund the real property into the trust. There are of course, different methods regarding each type of asset, and how we change that ownership or beneficiary may depend on the tax ramifications associated with it, but everything needs to be changed in some way. And those changes need to work with, not against the Estate Planning.
So get in to see your attorney today, and make sure your property titling is working with your Estate Planning. FUND FUND FUND! What good is the paper, if you don't do anything with it?