Imagine buying a beautiful new family car, taking it home, and leaving it parked in your garage. Then, instead of using your shiny new vehicle to transport your family, you use public transportation to get you and your family around. As silly as that sounds, that is what happens to many clients who establish trusts but are not properly advised on how to fund them. This article will begin with an overview of trusts, then discuss the importance of funding trusts and finish with common examples. We will focus on the revocable living trust as a tool to avoid probate, but keep in mind that there are many different types of trusts with different purposes. This article is only a brief overview and any practical decisions should be discussed with a competent estate planning attorney.
Simplified, a trust is a family agreement wherein you ask someone you trust to take care of the assets you transfer into the trust. That person, called the trustee, is often you while you're alive and a child or relative after you pass away. A trust can have its own separate tax identification number, but often uses the social security number of its creator, also known as the Grantor. Trusts can be used for a variety of purposes, including protecting assets when applying for Medicaid. Almost all trusts avoid the court process of probate, which can sometimes be lengthy and expensive. Avoiding probate means that your beneficiaries can have access to your assets almost immediately and do not have to wait until the Surrogate's Court accepts your Last Will as valid.
In order for a trustee to have any control over the assets of a trust, that asset needs to be owned by the trust. For example, if Joe sets up a trust and names Jane as the trustee to allow her to manage his bank account when he passes away, he needs to make sure that the bank account is owned by the trust. Otherwise, the bank account will remain in his individual name and will require probate. The same hold true for all of Joe's assets, including his home, investments, real estate, and businesses. If Joe was looking to invest in his retirement, he could also look at putting money into stock investment and trading, whether that is in a company similar to Amazon or learning how to buy Bitcoins or other cryptocurrencies (see eine Anleitung zum Kauf von Bitcoin mit Paysafecard if you're German). In fact, he could use trading platforms that are available online to keep track of his trade interests and investment. In addition, if Joe is trying to qualify for Medicaid and needs to transfer his assets to do so, setting up a trust is not enough, he will also need to transfer his assets into the trust so that they are no longer in his name. Not funding a trust is like buying that beautiful car, but never using it.
Trusts are funded differently depending on the assets you need to place inside of it. Below are a few examples:
In addition, the trust should be reviewed to make sure it reflects your wishes and owns the assets which it was designed to. If you acquire additional assets in the future, they can usually be titled directly into the trust to save time and money. Anyone engaging estate planning should be commended for being responsible and protecting their loved ones when they pass away. However, just executing a trust is not enough; it must also be funded properly.
Roman Aminov, Esq. is a NYC estate planning and elder law attorney. You can contact him at (347) 766-2685
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