Estate planner: Importance of funding your trust
Oct 2016
There are many reasons to establish a trust. There are also many different types of trusts that can be established. Some important reasons include: avoiding probate to save time, money, and to keep matters private; asset protection for beneficiaries, such as protection from their creditors, divorce, bankruptcy, lawsuits, or their own long-term care costs; disability planning; security and protection for minor beneficiaries or beneficiaries with disabilities; eliminating or reducing estate taxes; protection for second marriages, etc. The list goes on and on. However, a trust is only beneficial if it’s funded. A well-drafted trust with all the planning and protection possible is worthless if nothing has been funded to the trust.
After a trust is signed, assets are usually funded to the trust. This means that the title/ownership on the assets are changed from one or more individual names, to the trust. When the trust is named as the owner of the asset, it means that the asset has been funded to the trust. The terms of the trust control that asset. Each trust has a trustee, who is the one managing the assets in the trust. In some cases, that may be the trustmaker, but not always. This can be helpful in case of incapacity of a trustmaker because the trustee, or successor trustee, can access and manage the assets in the trust right away.
Funding a trust can also mean that beneficiaries are updated from individuals to the trust. For example, the owner on qualified accounts are never changed to a trust, but the beneficiaries on a qualified account may be a trust, or trust shares. When the trust is named as a beneficiary, this means that the account will pay to the trust upon the death of the account owner.
A pour-over will is a will that is usually done in conjunction with a living trust estate plan. The purpose of this will is so any assets that were not funded to the trust, will be funded to the trust after the death of the trustmaker. It’s important not to reply on this as a funding mechanism because if the total assets not funded to the trust with no beneficiary named exceed $50,000 in Wisconsin, there will need to be a probate.
Wills only control those assets that have no named beneficiary. A named beneficiary will override a will or a trust, so it’s imperative that the named beneficiaries are always up-to-date and coordinated with the overall estate plan.
If you own a business, it’s possible that you may want to fund the business to your trust. I strongly suggest discussing this with an estate planning attorney. If you have a business that is not funded to your trust, there may need to be a probate upon your death. However, not all entities can be funded to a trust, so careful review and consideration from a professional is recommended.
Every time you open a new account or purchase a new asset, make sure to fund it to your trust. Legal counsel is strongly recommended to provide the guidance on how to fund assets to your trust, whether you should change the owner or the beneficiary. The type of trust, the purpose of the trust, and the type of asset can all affect how it should be funded to the trust.
Carissa Giebel is an estate planning attorney and owner of Legacy Law Group LLC. She can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it., www.legacylawllc.com or (920) 560-4651.
