The Importance Of Estate Plan Funding

By Matthew A. Ferri, Esq.   Without proper funding, your estate plan won’t work. Why is that? Estate Plan Funding is the process of retitling your assets or updating your named beneficiaries to achieve your intended result. If you have a living trust, that could mean you and your loved ones experience less burdens, your assets are distributed accordingEstate Plan Funding | Trust Funding | Estate Planning Attorney to your wishes, and your estate avoids the probate process.

Estate Plan Funding – Bank and Investment Accounts

Changing the title on assets such as bank or investment accounts to your trust as the owner, can make it easier during disability and after death. As the initial trustee, you would remain in charge of the account while you are alive and well. Then, the individuals you’ve named as successor trustee(s) are put in charge if you become incapacitated, by informing the financial institution that they are now managing the trust. This can be an easier way for them to step in and use the funds for your care and needs. Without titling the accounts into the name of your trust, your loved ones would either need a financial power of attorney or to go through the process of opening a conservatorship with the probate court to gain control of the account to act on your behalf.

Risky Alternatives

Some may attempt to achieve the same result by simply adding their child’s name to the account. However, this comes with more risks. Your child has full right to the money once their name is on the account, this means they could access and use the funds for themselves. Or, if that child is ever exposed to creditors, the creditor could be able to attach a claim to your bank account because your child’s name is on it, and it is considered one of their assets.  Because it is their asset, it may interfere with obtaining college financial aid for their children.  Your account can even be dragged into your child’s divorce.  This can all be avoided with proper estate plan funding.   Creating an estate plan with the proper funding can protect your assets in bank and investment accounts for your use and against bad faith actors.

Estate Plan Funding – Real Estate

Retitling assets for protection should also include real estate. By putting any houses or property under the name of your trust, you can leave behind specific instructions within your trust for those pieces of real estate. This can be beneficial if you want your house or a cottage, for instance, to go to a particular individual. It can also mean your house does not have to be transferred through the probate court which would add expense, time, and possibly frustration for your loved ones. Funding real estate can also provide the added layer against your beneficiary’s creditors so your home can stay in the family for generations to come.

Estate Plan Funding – Retirement Accounts

The funding process also includes naming your trust as a beneficiary for retirement plans and insurance policies. You may already have these set up with your spouse or children as named beneficiaries and think that is sufficient. But, by having them inherit the proceeds of those assets through their trust shares keeps the money protected and you in control. You can lay out the terms for their shares. Your trust can set up creditor and remarriage protections. You can give them as much or little control over those distributions as you believe they can fiscally handle. This way you can have comfort that your loved ones are inheriting your hard-earned money.  And you’ll know there are safeguards in place if needed.

Benefits of Trust Funding

By properly funding your trust, you maintain control over your assets while you are alive and well. You also protect the funds for the possibility of disability and against creditors. And you retain the ability to have it distributed to whom you want, when you want, and in the way you want. You’re also saving your loved ones from tedious probate court processes, as well as a possible scavenger hunt when you’re gone to find out what accounts you owned where, and what policies are still good. Fully funding your trust is a crucial step, and you should approach it with an estate planning professional. Someone to work with you on the instructions to the various institutions.  A professional to follow up with them to make sure it is done; and to thoroughly record your various assets so your loved ones can be assured there will be no future surprises.

Learn more about how having a properly funded trust can protect you and your family.  Contact our office to schedule a complimentary initial consultation, (248) 409-0256.

About the Author

Matthew A. FerriJ.D., M.B.A., is the Founder and Principal of Life Focus Planning, a Michigan based estate planning law firm.  He is an estate planning attorney with offices in Bloomfield Hills, Michigan and Shelby Township, Michigan.