In many cases, it makes sense for people to include a revocable living trust in their estate planning documents instead of relying on a will to do the heavy lifting for them. People like the control and peace of mind a trust gives them.
One of the key benefits of a revocable living trust is how it avoids the long, protracted process of probate. A trust can also provide for spouses without disinheriting children, which is especially applicable in second and subsequent marriages. Not only can they save estate taxes, but they can shield inheritances for children and grandchildren from creditors, spouses, divorces, and beneficiaries who are irresponsible with money.
It’s great to have a trust, but you have to use it correctly. If you don’t fund your trust, you can make a big mistake and your assets can be sent directly to the probate court.
How to Fund a Trust
“What does it mean to fund a trust exactly?” When you fund your trust, it means you are transferring your assets into the trust. To fund a trust, you have to actually change the titles of your assets so they’re not in your individual name (or joint names if you’re married), and switch them so they are in the name of your trust.
“Do I control my trust assets or someone else?” You decide who controls the assets in your trust. You can name yourself as the trustee of the trust and name a successor trustee who will control it after your death, this way you’re in control while you’re alive. Here are some of the key assets of a revocable living trust:
- You can name yourself as the trustee
- You can buy and sell assets just as you do now
- Since the trust is revocable, you can change it at any time
- If you ever decide to, you can remove assets from your trust
Why Funding Your Trust is So Important
Your assets are only protected if they’re actually placed into the trust, which is accomplished by the process described above – by putting the assets in the trust’s name. If you establish a living trust, but you don’t change any titles or beneficiary designations, your assets will not be controlled by the trust and if something happens to you, they cannot avoid probate. Your trust will only have control over those assets placed (funded) in it.
“What if I forget to transfer an asset and I pass away?” Your attorney will create what’s called a “pour-over will,” which we like to describe as a safety net. When you pass away, the pour-over will “catches” any assets that you forgot to include in your trust and it sends them to the trust. The forgotten asset will probably be subject to probate, but instead of being controlled by the probate process, it will be distributed according to the instructions in your trust.
To learn more about setting up a revocable living trust in California, contact Nguyen Law Group at (909) 328-6280.