I’m sure at one time or another you have heard the term “probate,” but what does it mean? Probate is the process of determining, through the court system, whether the Will of a deceased individual is valid. On the surface, this doesn’t sound so bad, right? Think again. If your estate planning is not completed correctly, then your estate can be subjected to a long and complicated probate process, with which your loved ones will be left to deal. There are many steps that must be taken to prepare your estate properly. One critical aspect of estate planning for those who have formed a Revocable Living Trust is to fund the trust.
There are four ways assets are transferred at death to beneficiaries.
What is a Revocable Living Trust?
A Revocable Living Trust is a document used to determine who will receive your property upon your death. Often, Living Trusts are “revocable” because you can make changes to them. The term “living” references that the trust was created during your lifetime. This trust differs from an Irrevocable Trust because you cannot make changes to an Irrevocable Trust once it is executed.
Why should I transfer my assets to a Revocable Living Trust?
A Revocable Living Trust, if prepared properly, helps avoid the process of probate. This form of trust provides the grantor (the person for whom the trust is created for) with more power than a Will in terms of transfer and/or general control of their assets. Additionally, a trust allows for the privacy of one’s estate because it does not get filled in the public record. Therefore, it is imperative to fund your trust.
What does it mean to “fund” my trust?
Funding your trust simply means you are transferring assets into the trust that are currently held in your name, whether individually or jointly with someone else. Examples of assets include real property, beneficiary designations, membership interests in a limited liability company, or stock in a privately held corporation. Your estate planning attorney would assist you in preparing for this by explaining each of the steps, gathering the necessary information and documentation, and executing the documents such as deeds or ownership certificates. It’s essential to understand that if you do not fund your trust, you will not avoid probate or utilize all of the benefits of creating a trust.
Once the title to my assets are transferred to the trust, who controls my assets?
You will name a Trustee, and that individual will control the assets. Typically, you will be named as Trustee of your trust, thus providing you with control over your assets. As explained above, since the trust is “revocable,” you may continue to buy and sell your assets as you just as you did before the creation of the trust. You can move assets in and out of the trust however you deem fit. You will also name a successor Trustee who will take over in the event of your incapacity or death.
I forgot to transfer an asset to my trust; now what happens?
Typically, your estate planning attorney will prepare what is called a “Pour-Over Will” in addition to your trust. Think of it this way, your trust is Plan A, and your Pour-Over Will is Plan B. If you forget to transfer an asset to your trust, then the Pour-Over Will gains control over those assets.
Furthermore, a Pour-Over Will provides that during the probate process, any assets that failed to transfer during your lifetime will be transferred and titled in the name of your Trust after your death. Thus, as you can see, you want to transfer assets into the Trust while you’re living to avoid the Pour-Over Will probate process.
Should I transfer all my assets to the trust?
Unfortunately, this isn’t a simple yes or no answer. As everyone’s situation is different, it is always best to meet with your estate planning attorney and review all of your assets. From there, you will be better advised as to the pros and cons of transferring each specific asset. For example, in the State of Florida, it is usually inadvisable to transfer your homestead property (the real property which is considered your home) to your trust because you may jeopardize some of the homestead protection by doing so. However, that doesn’t mean it’s always inadvisable; there may be some situations in which it’s beneficial. However, those situations tend to be unique and require a thorough discussion with your estate planning attorney.
Assets to consider when it comes to funding your Florida Revocable Living Trust.
For questions on funding your Revocable Living Trust, or other estate planning questions, please Contact Us.
This blog was written by the Hunter Business Law Team.
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