Trust Funding

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TRUST FUNDING

Ever hear a story like this before?

A person you know has a trust, they die and their estate ends up in probate. Everyone is confused because they thought the whole point of having a trust is to avoid probate in the first place. The affairs of the person who passed away are a mess and a lot of money, time and energy is spent to resolve them.

Sound familiar?

The problem was that the person did have a trust, which is terrific, but the trust was not properly funded.

What is trust funding

In order to avoid probate, a revocable living trust must "fund" all of the trust assets into the trust after its creation. Trust funding is the process of funding all of the assets into the trust to avoid probate.

Creating a trust and funding a trust are two separate things. An attorney can help you create a trust. However, most if not all attorneys will only help you fund some of your assets into your trust, usually your home.

Are there different methods of funding a trust?

Yes, assets can be funded into the trust prior to the death of the settlor or after the death of the settlor.

What's the difference?

The  basic  difference is the method of funding. Funding assets into a trust prior to the death of the settlor usually means re-tilting the ownership of the asset into the name of the trust.

Funding assets into a trust after the death of the settlor usually means by use of beneficiary designations, payable on death (POD) and transfer on death (TOD) designations.

What are some examples?

In Missouri, one example is a TOD designation on your vehicle. A form can be completed which says that the vehicle is owned by Jack and Jill Smith, as husband and wife, with a TOD designation to "Jack and Jill Smith, as trustees of the Jack and Jill Revocable Living Trust." Once the form is filled, a new title for the vehicle is issued and upon the passing of Jack and Jill Smith, ownership of the vehicle transfers to the successor trustees of Jack and Jills trust, who will then distribute the vehicle, subject to any liens, to the trust beneficiaries named in their trust.

Why is trust funding so complicated and why don't attorneys do it for you?

The problem with trust funding is that it is very detail oriented and often time consuming.  For this reason, most attorneys cannot justify charging their clients at their hourly rate to do the funding for them. To do so effectively would probably cost anywhere between 50% and 100% of the cost of the trust itself. Attorneys aren't being lazy, they just know clients don't want to pay them to do something that a client can theoretically do themselves.

Instead, many attorneys provide a set of funding instructions. Those instructions, however, are complex and most people have no experience funding trusts.

Adding to the complexity is that the policies of banks and financial institutions vary widely. If you are attempting to create a POD designation for your bank account, you may encounter a teller at a bank who has never done this before, or who thinks they know how to handle this issue but actually does not.

This is why trust funding is considered somewhat of a "black hole" of estate planning. Clients want to protect themselves with a trust and attorneys want to provide that protection, but the protection is only complete when a trust is funded, which is the second part of the equation and just complex as creating a trust.

So how can Legacy Law Center Help?

We have streamlined the process and our system allows for us to complete funding for clients at a lesser cost than most firms.

Our firm offers clients two solutions for funding.

The first is the traditional set of instructions on trust funding, as most firms do. However, unlike most firms, within six months of signing your documents, we will meet to see where you are with funding. There is no charge for this meeting, but it ensures that your progress has been reviewed and at the end of the meeting, you'll know what needs to be done to complete the funding. At the end of the meeting, you may decide to let us handle the funding for you. We charge a flat rate per item that needs to be transferred.

The second solution is to use our staff right away and pay a flat rate per item that needs to be transferred.

Another attorney completed my trust, but we never funded it. Can your firm fund it for us?

Yes, as long as you have a copy of all of the trust documents and know which items still need to be funded.


 

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