Creating a living trust can be an important part of an estate plan, but signing the document is not always the final step. If assets are not properly coordinated with the trust, the trust may not control or receive those assets as intended after your death. That can leave your family dealing with probate for property you expected the trust to handle.
What does it mean to fund a trust?
Funding a trust generally involves moving ownership of certain assets into the trust. Simply creating and signing a trust document does not automatically place every asset you own under the trust’s control or make the trust the beneficiary of every account or policy.
For example, if a Washington home remains titled solely in your name, the trust may not avoid probate for that property merely because the trust document refers to the home. Similar issues can arise with certain financial accounts and other assets.
Which assets need attention?
Not every asset is handled the same way, so reviewing how property is titled is important. Depending on your estate plan, this may include:
- Real estate
- Bank and investment accounts
- Business interests
- Other property that you specifically intend the trust to control
Some assets, such as retirement accounts and life insurance policies, generally use beneficiary designations rather than being retitled in the same way as other property. Depending on the estate plan, a trust may be named as the beneficiary. Those designations should be reviewed as part of the overall plan.
What happens if an asset is left out?
An asset that remains outside the trust may pass under another part of your estate plan or, depending on how it is titled and whether another transfer mechanism applies, through probate. A pour-over will can provide a backup for certain assets. Still, it does not necessarily provide the same probate-avoidance benefit as properly transferring the asset to the trust during your lifetime.
A review of the trust and the assets it is intended to control can be just an important part of maintaining the estate plan.
When should you review your trust?
Major changes such as buying or selling real estate, opening new accounts, starting a business or changing your family circumstances can affect whether your estate plan still works as intended. A periodic review can help identify assets that were never transferred to the trust or accounts whose beneficiary designations no longer match your wishes.