I often review trusts that have been drafted by other attorneys that need to be restated. When I do this, I always review what has been funded into the trust and what has not been moved into the trust. I’m always surprised (as are the clients) by what has not been moved into trust title. Trust funding is a critical aspect of your estate plan.
My favorite faux pas is when I see a document or an attachment to the trust that is a self-funding clause. What I mean by this is that it’s a statement that says everything the client owns is now transferred to the trust. However, that is not how it works. Any asset that has an actual title to it needs to be moved into the trust through the financial custodian or the mechanism that is tied to the title or ownership of that asset.
For example, a piece of real estate needs to be moved into trust title on the deed and filed with the recorders office in the county where the real estate is located. A brokerage account (non-retirement) at Fidelity must be transferred through their transfer form into trust title. When moving a vehicle into your trust, it should be transferred to the trust through the DMV using the DMV’s transfer form and the pink slip.
However, be careful with retirement accounts and life insurance. These types of assets are not owned by your revocable trust but should be carefully coordinated with your trust plan. For example, in many cases, a married couple should list their trust as the primary beneficiary of their life insurance policies. It is important to check with your attorney first however just to make sure that that is the best course of action for your estate plan.
For retirement accounts, it is often best to list your spouse as the primary beneficiary and your trust as the contingent. However, you should check with your attorney first before making this crucial decision in your estate plan.
If you feel as though your estate plan is not fully funded and you need our help, please give Chelsea Donohoe a call at 760-448-2220 or email her at [email protected]. She will get you scheduled to meet with me, so we can take care of funding your trust.