A coherent strategy for the transfer of assets is, of course, crucial to the success of any estate plan. But our best-laid plans will fall far short of expectations if the trusts we’ve so carefully drafted are never properly funded.
If the trust is the car, the funding is the fuel. Without gas in the tank, that beautiful sedan with the precision engine is just metal on four wheels. It’s not going anywhere. The same holds true for an estate plan . Until it’s properly funded, the “plan” is just a plan – a plan that can’t be executed. Like the car with the needle on empty, it’s not going to take you anywhere.
Proper trust funding involves moving assets that are in the client’s name and retitling/reassigning them to the trust. These assets fall under three main categories:
- Personal property and real property with title (home, car, boat, etc.)
- Non-titled property (computer, furniture, artwork, tools, etc.)
- Property that passes by beneficiary designation (life insurance, 401(k), etc.)
In certain instances such as incapacity, the General Durable Power of Attorney can be useful in funding a trust. This ancillary document allows the agent acting under Power of Attorney to transfer assets or update beneficiary designations. Additionally, where property remains in the individual’s name at the time of death, the Pour-Over Will can be a “last step” measure to redirect the assets into the established trust. These special instances, however, underscore the importance and the advantage of acting early to properly fund a trust. By doing so we greatly diminish the need for the Durable Power of Attorney and eliminate any need of the Pour-Over Will.
A timely reminder: Our 2015 Symposium in San Diego, July 14-17, will feature a special session on trust funding. In this panel discussion, experienced estate planning attorneys will share their tactics and techniques, offer practical solutions and answer your trust funding questions. Don’t miss this opportunity to sharpen your trust funding skills. And learn more about our estate planning software for attorneys. Wealth Docx has the tools and resources you need to effectively plan for your clients and their circumstances.