Bite-Sized Bits of Knowledge

Welcome back to another dose of bite-sized Bits of Knowledge, where we give you meaningful information in a short amount of time. Today, we’re going to talk about trust funding. It’s a common discussion point that we have. What does it mean and why should you care? You’ve gone through You’re in the process of doing your estate planning. You probably have a trust that’s part of that plan. Congratulations, you’ve accomplished a lot that most people don’t do. Even if you go no further, you’re saving yourself and your There’s only a lot of hard ink, so you should be happy and congratulatory towards yourself on that. Now, let’s dig a little deeper here. You have your trust, and you’re probably wondering what to do with it now. It’s very common that everybody you know who has a trust says you have to fund your trust right away. A lot of attorneys are going to push you to get your trust funded. Some will help, some won’t. But what does it mean to have your trust funded? If you go back to our probate videos, you would learn that probate I’m sorry, a state administration, really only is necessary if you have assets that remain in your name upon your death.

They have to go somewhere, and that’s determined, as you recall from our ABCs of probate, those assets have to go to someone, and that’s determined by statute, will, or trust. Typically, statute or will, and then it goes to the trust, maybe. And so That’s important because if you don’t fund your trust now and you forget and you pass away, then those assets, if you have a trust, most likely you have a poor over will that says, put everything in trust. Most likely if you go to probate, the will will say, Dump it into the trust. But that still requires going through what I affectionately call the post mortem toll booth of probate. It’s unnecessary. It’s expensive. It’s time consuming. It’s a real pain in the butt. Trust Funding would sound like that’s something you should do right away. You bank your trust, you move things over to it. Now, what does that mean? That means that bank accounts, properties, businesses, life insurance, annuities, things can be moved into the name of the trust. Typically, the name of the trust is the John Doe Family Trust, U uad, date of execution, the John Doe Declaration of Trust, UAD, date of execution, or the John Doe Revocable Trust, UAD, in the date of execution.

I don’t like the revocable trust of the name. It confuses everybody when you pass away, and it becomes irrevocable when it has revocable in the name. So we don’t do that. You can fund the trust by retitling assets into its name at the bank through a deed for real property, through necessary documents if it’s a company, through life insurance, beneficiary designations if it’s life insurance. The question is not how to do it. That’s not that hard. The question is when to do it. And so we get a lot of people that ask us because they forget or they talk to other people who said that they funded their trust and then that makes them insecure and they’re wondering, why didn’t How do we do that? And so I thought that this video would be helpful to explain that it’s not all black and white when it comes to funding your trust. Again, if you don’t fund the trust, your downside is that you have a probate which will move the assets to the trust through what I effectively call a post mortem toll booth probate. And that’s not the worst thing in the world. It’s just a little time and money and pain in the butt.

It could be avoided, it should be avoided. But at the same time, there’s a reason for taking the risk. And the risk, as I describe it to people, is… Well, let me back up. If you’re a single person, you’re not married, I would say fund your trust immediately. Typically, I would say fund your trust immediately because there’s no real reason not to. Generally speaking, of course, everybody’s situation is different. But generally speaking, fund your trust if you’re single or not married because there’s no reason not to. Now, if you’re married, at least in Florida, Florida has a special form of ownership with a spouse. It’s called Tenants by the Entities. And that form of ownership has a degree of asset protection. And so when it comes down to finding your trust, I view it as a a a balance, like a seesaw of on one hand, you have your asset protection, and on the other hand, you have your probate avoidance. And particularly, simultaneous death, probate avoidance. You have your asset protection of owning it as husband and wife or spouse and spouse, whatever it is. That’s a degree of protection that does not exist if you put it into trust.

Nearly all trusts, of course, with exceptions, are not helping you to protect assets in Florida. By moving it to your trust now, you might be destroying that asset protection protection that you have. That’s why I said it. It comes down to a simultaneous death, risk of probate, and asset protection. Now, why do I keep saying a simultaneous death? Because if you own it as husband and wife, spouse and spouse, Then upon the death of one of the spouses, it’s received, it’s inured to the benefit of the surviving spouse automatically by operation of loss. So it’s not going to go to probate on the death of the first spouse. It’s going to go to probate on death of the surviving spouse, which by then you can move it to the trust. The real risk, as I see it, is the simultaneous death of both spouses going to probate versus protecting your assets and keeping it owned that way until one of them passes away, and then you can move it over to the trust. With other types of certain assets, you can designate that it goes to the trust upon death of the survivor anyway. You should look at those, in my opinion, you should look at those to typically rather than retitle them because that preserves that asset protection and avoids the the simultaneous death issue.

My bottom line here is that it’s a… Funding a trust is not a black and white thing. It’s different for everybody. I think that the main considerations are simultaneous death and avoiding probate versus asset protection during your life. Most people that we work with, asset protection is very important. So these are some considerations before knee-jerking into both funding the trust and worrying about why you didn’t do it. I hope that you found this helpful. Thanks for stopping by, and stay tuned for more.

Haimo Law