By: Barry E. Haimo, Esq.
September 1, 2015
The Importance of Funding Your Trust in a Proper and Timely Manner
While creating a trust is a good first step, it is by no means the last.
For a trust to work effectively, it must be properly funded. “Funding” refers to the process of placing assets and property into your trust by re-titling them in the name of the trust. If you want the trust to hold financial assets such as life insurance, retirement plans, and annuities, you will also need to name the trust as beneficiary to these assets.
By neglecting to fund your trust while you are alive and healthy, you can create major problems for your survivors down the road.
The Attenborough family had a particularly tough time when their father neglected to properly fund his trust in a timely manner. Read on to learn more about their unfortunately common situation.
Survivors Suffer When Father Forgets to Fund Family Trust
Nathan Attenborough’s wife, Samantha, was fond of saying that Nathan would lose his head if it wasn’t screwed on tightly.
Nathan was far from thoughtless, but he did have a way of forgetting key information, important dates, and other things that ought to have been remembered. He showed up an hour late to the 30th anniversary dinner for which he had made reservations. He brought convenient store-bought flowers, explaining that he’d forgotten all about it and scheduled dinner with a friend at the same time.
He mixed up his adult children’s birthdays. He could never find his keys. He forgot the names of movies, referring to them instead with phrases like “that one where the boy sails on a big peach” or “the comedy where than British guy is a sexy spy.”
For the most part, Nathan’s family and friends found his forgetfulness amusing. Nathan’s heart was in the right place, after all, and no real harm ever came from forgetting a movie title or birthday here and there.
It wasn’t until after Nathan’s death that his forgetfulness really caused problems.
For all his forgetfulness, Nathan cared about his wife and children deeply. Nathan and his wife worked with an estate planning attorney to craft an estate plan that would provide for their survivors after they passed. After writing a will, the couple established a trust in order to ensure their assets would pass to their children without having to go through the lengthy and costly probate process.
Both his attorney and wife urged Nathan to transfer his real estate, investment accounts, and other important assets into the trust as soon as possible. Nathan had every intention of doing so, but somehow kept getting sidetracked. Things were crazy at work, and he had to hire on nearly 20 new employees. When his wife, Samantha’s 50th birthday rolled around, he wanted to plan a big surprise party. His oldest daughter had a baby, so he and his wife took a long road trip up to Maine to see them.
Nathan meant to fund his trust properly—but he never got the opportunity. On the ride home from Maine, he and Samantha were killed in an accident.
The couple had $4 million worth of assets in their name. But since Nathan had never taken the time to place the assets in the trust, they had to go through probate in order to be transferred. The process of probating the assets was lengthy and grueling for his children, who were already stressed and upset by their parents’ sudden passing. The children were left to pay for their parents’ funeral out of pocket during a particularly tough financial time, as the eldest had just had a baby and the other two were still in school.
In the end, the probate process ended up lasting over a year, and cost them a hefty chunk of money in the form of taxes and legal fees. Had Nathan realized the amount of hardship and stress his slip of the mind would end up causing his children, he certainly would have heeded the advice of his wife and attorney much more urgently.
A trust is an excellent tool for protecting your assets for your loved ones, helping to avoid the stress and cost of probate and guardianship, and meeting a variety of other estate planning goals. However, it is crucial that the trust be properly funded in a timely manner if you want it to carry out its function effectively.
If you have created or are considering creating a trust, it’s highly advisable to consult with an estate planning attorney. Your attorney can help you draw up the trust in a way that meets your unique needs, and work with you to anticipate complications, which will minimize encountering obstacles that could keep your trust from achieving its purpose.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.