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It’s Not Enough to Simply Form a Trust, You Also Have to Fund It


Most people who have put together an estate plan have also established a trust. Trusts are especially appealing because they allow you to bypass probate. However, in order to do so, you must title all of your assets correctly. This includes such items as bank and brokerage accounts, business shares, real estate, and more; all of which has to be not only transferred into the trust, but titled in the name of the trust (i.e. “funded”) in order to bypass probate.

The ultimate purpose of funding a revocable living trust is to make sure that property is managed pursuant to the trust agreement terms. In the event of incapacitation or death, accounts are thus managed and transferred based on the trust maker’s wishes and named beneficiaries.

Overlooking Some Assets

In particular, people tend to place most of their assets in the trust, but will also sometimes forget about including some of them, for example foreign real estate is one that often gets overlooked. In this case, when the assets are not titled properly (i.e. in the name of the trust), then they will go through probate. Keep in mind that any assets not included in that trust cannot be managed by the trustee, which means that the trustee has no power over them and, in the event of mental incapacitation, for example, certain relatives could attempt to establish a conservatorship or guardianship to manage those assets outside of the trust.

What Is Typically Managed Outside The Trust

In addition, there are going to be some assets that are not necessarily meant to be managed by the trust, for example, those that are owned jointly with the right of survivorship. In addition, other assets are controlled by beneficiary forms, such as Annuities, IRAs, and life insurance policies.

You do have the option of naming the trust as the beneficiary for these accounts as well. Some people like this because the death benefits are then not taxed. However, it is important to keep some factors in mind when it comes to naming a trust as the beneficiary of accounts: for example, some do not allow for continued tax deferral, and none allow for a deferred annuity to be stretched. If the trust is the beneficiary or owner, the annuity proceeds have to be stretched out over the course of five years. This is why many people just decide that their, IRA funds, for example will pass directly onto their beneficiary instead of the trust.

Contact Our Florida Estate Planning Attorneys to Find Out More

If you live in Florida and have any questions about estate planning, trusts, or probate, contact our experienced Orlando estate planning attorneys at Gierach and Gierach, P.A. today to find out how we can help.



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