Did you remember to fund your trust?
Finalizing your estate planning documents is a great accomplishment because you now have complete peace of mind that your wishes will be fulfilled.
Unless you forgot to fund your trust.
What does that mean? Trust funding?
When you create a trust, it is generally an empty shell at first. It’s practically worthless unless you actually put stuff into it, otherwise, the trust has no authority or control over the particular assets or property in question.
So, what does trust funding look like in practice?
For real estate - check your deeds (if you can’t find it, I should be able to pull it up for you from the public registry), and see if it clearly states your trust as the new owner (sometimes referred to as “grantee”) on the deed. In Massachusetts, it typically looks something like this “John Smith, as Trustee of the John Smith 2022 Revocable Trust, u/d/t dated March 15, 2022”
If you don’t see your trust at the beginning of the deed, give your attorney a call ASAP. Also, keep in mind that any property out of state that is not held in trust will require its own probate or estate administration, which can be a nightmare for your family to deal with, so make sure all of your properties (like that Airbnb you just bought) is held in the trust.
For companies - LLC’s are a little bit different in that they generally just require a written signed and notarized assignment (although check with your operating agreement for any required consents). Corporations usually have bylaws that cover when and how you can transfer your ownership into the trust, but follow a similar written procedure and you generally update the business ledger documenting who owns what shares to make sure there is no ambiguity as the trust being the new owner of the company.
For nominee trusts - aka realty trusts - you must have an updated schedule of beneficiaries showing your trust as the beneficiary. If you can’t find your schedule of beneficiaries, make sure to track down the drafting attorney before he or she retires or you’ll be in a tough spot.
For life insurance - depending on your situation, the policy will either be titled in trust (owned by the trustee of the trust) or have the trust named as a death beneficiary. You should be able to check this by looking at your policy or by looking at the annual statements you receive from your life insurance provider.
For qualified/retirement accounts - there are attorneys who literally write books on this stuff, and the proper procedure for retirement accounts is too specific to each person's situation to give you an accurate answer for what you personally should do. What I can tell you is that for income tax and simplicity purposes, many of my clients that do not have a taxable estate will usually leave their spouse as the primary death beneficiary and then may either name the trust as the contingent beneficiary (if their children are minors) or name their adult children as equal contingent beneficiaries, per stirpes (if they are all financially mature and have no issues).
For non-retirement investment accounts (e.g., taxable brokerage accounts) - once again, check with your advisors, but if you have substantial assets you’ll probably want these accounts titled in separate trusts to make sure you capture estate tax savings opportunities or you’ll at least have your trust as the transfer on death (“TOD”) designation. Same with checking/savings - although you may see the death beneficiary designation on your checking account referred to as “POD”or pay on death.
One last thing - if you have any physical bonds or stock certificates laying around - please get them converted to electronic form or digitized as soon as possible. It’s 2022 and your millennial heirs don’t know what paper is.
Need help with your estate planning? Give me a call at 781 202 6368, email jlento@perennialtrust.com, or click here to schedule your free personal consultation.
I’m always happy to help,
Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
For client testimonials, please visit: www.PerennialEstatePlanning.com
Conveniently located at 477 Main Street, Stoneham, MA 02180
