Many people create a trust because they believe it will help them avoid probate entirely. While a trust can simplify estate planning, it does not always eliminate the need for probate. This is often due to misunderstandings about how trusts work and the steps required to ensure they achieve their intended purpose.
Partially vs. Fully-Funded Trusts
A trust is only as effective as the property it controls. To achieve its purpose, a trust must be funded with assets. A partially funded trust contains some but not all of your assets. A fully funded trust includes everything you intend to transfer into it.
For example, if you create a trust but fail to transfer the titles of your assets, those assets remain outside the trust. This often happens with vehicles, financial accounts, or property in another state. If these assets are not titled in the name of the trust and have no designated beneficiaries, they will require probate to transfer ownership after your death. Failing to do this will defeat the trust’s purpose if probate avoidance is your goal. If your assets are not titled in the trust’s name, they exist outside its protection and control. This means that these assets will still have to pass through probate.
Additionally, people sometimes assume that creating the trust is enough to ensure their estate plan is complete. In reality, the funding process is just as important as making the trust.
Things You Need to Do After Setting Up a Trust
After creating a trust, you must take several steps to ensure it works as intended. First, you need to transfer assets into the trust. This involves re-titling property and accounts so they are owned by the trust rather than by you. For example, vehicles should be registered in the trust’s name, and deeds to real estate must be updated. The names must match the owner’s and if you want the trust to own it then it needs to be updated.
For financial accounts, you may need to work with your bank or financial institution to re-title the account in the name of the trust. If the institution allows it, you can name the trust as your beneficiary where retitling is not an option or is undesirable for some reason.
Another critical step is updating your beneficiary designations. This applies to life insurance policies, retirement accounts, and other financial instruments that allow you to name a beneficiary. Ensuring these align with your trust can prevent gaps in your estate plan.
Regular reviews of your trust is also necessary. Life changes, such as acquiring new assets or changes in family circumstances, can impact your trust. Reviewing your trust periodically helps ensure that all assets remain appropriately titled and that the trust continues to meet your goals.
Build the Plan That Works For You
If you want to ensure that your trust is properly funded and effective in avoiding probate, speak with an experienced estate planning attorney. Creating the trust is the first half of the equation. Some people have spent the time and money to make one but haven’t realized that they have to title their assets appropriately to get the full benefits of the trust they created. We can also review y
Many people create a trust because they believe it will help them avoid probate entirely. While a trust can simplify estate planning, it does not always eliminate the need for probate. This is often due to misunderstandings about how trusts work and the steps required to ensure they achieve their intended purpose.
Partially vs. Fully-Funded Trusts
A trust is only as effective as the property it controls. To achieve its purpose, a trust must be funded with assets. A partially funded trust contains some but not all of your assets. A fully funded trust includes everything you intend to transfer into it.
For example, if you create a trust but fail to transfer the titles of your assets, those assets remain outside the trust. This often happens with vehicles, financial accounts, or property in another state. If these assets are not titled in the name of the trust and have no designated beneficiaries, they will require probate to transfer ownership after your death. Failing to do this will defeat the trust’s purpose if probate avoidance is your goal. If your assets are not titled in the trust’s name, they exist outside its protection and control. This means that these assets will still have to pass through probate.
Additionally, people sometimes assume that creating the trust is enough to ensure their estate plan is complete. In reality, the funding process is just as important as making the trust.
Things You Need to Do After Setting Up a Trust
After creating a trust, you must take several steps to ensure it works as intended. First, you need to transfer assets into the trust. This involves re-titling property and accounts so they are owned by the trust rather than by you. For example, vehicles should be registered in the trust’s name, and deeds to real estate must be updated. The names must match the owner’s and if you want the trust to own it then it needs to be updated.
For financial accounts, you may need to work with your bank or financial institution to re-title the account in the name of the trust. If the institution allows it, you can name the trust as your beneficiary where retitling is not an option or is undesirable for some reason.
Another critical step is updating your beneficiary designations. This applies to life insurance policies, retirement accounts, and other financial instruments that allow you to name a beneficiary. Ensuring these align with your trust can prevent gaps in your estate plan.
Regular reviews of your trust is also necessary. Life changes, such as acquiring new assets or changes in family circumstances, can impact your trust. Reviewing your trust periodically helps ensure that all assets remain appropriately titled and that the trust continues to meet your goals.
Build the Plan That Works For You
If you want to ensure that your trust is properly funded and effective in avoiding probate, speak with an experienced estate planning attorney. Creating the trust is the first half of the equation. Some people have spent the time and money to make one but haven’t realized that they have to title their assets appropriately to get the full benefits of the trust they created. We can also review your current plan and make any necessary updates. Contact our office today to schedule your consultation.
our current plan and make any necessary updates. Contact our office today to schedule your consultation.
Law Offices of Debbie J. Cunningham
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