● Funding: A Vital Step in the Estate Planning Process

Often, after having signed their estate planning documents, clients convey the relief they feel at having finalized their documents.  While signing your estate planning documents is undeniably important to the estate planning process, an equally important step of the estate planning process is to fund your estate plan with your estate planning professional.  Failure to do so could result in your documents not working as effectively as they might have, or worse, not being effective at all.

What is funding? It is the process of transferring assets from yourself to your trust. What happens at the funding meeting?   During the meeting, you and your attorney will discuss how each of your assets should be titled (this involves ownership and beneficiary designations).  The funding meeting is important because, on its own, a will or trust does not dictate how an asset will be distributed.  Rather, you must direct your assets, through ownership and beneficiary designations, to your will or trust to make the beneficial provisions of your will or trust controlling as to how your assets will be distributed.

With regard to funding a living trust, funding is accomplished by transferring the ownership of your assets into the name of your trust.  For example, if you currently own an asset in your name alone, you can transfer that asset into the name of your trust.  The trustee(s) of the trust will then become the legal owner of the asset.  Alternatively, sometimes funding your trust is accomplished by naming your trust as the beneficiary of the asset.  In the first scenario, the trust is funded during your life.  In the second, the trust is funded at your passing.

With regard to a testamentary trust (a trust created inside of your will) the trust does not come into existence until your death.  Accordingly, these trusts are not funded during your life.  Rather, assets should be titled so that your estate is the named beneficiary, the result being that, upon your death, the asset passes into the testamentary trust inside of your will.

Assets that should be considered during a funding meeting include:

–  real estate

–  cash and cash equivalents (e.g. CD’s, checking/savings accounts)

–  marketable securities (e.g. brokerage accounts)

–  retirement funds

If you have an unfunded estate plan in place, please reach out to your estate planning professional to schedule a funding meeting as soon as possible.  It is a crucial step to ensure that your estate planning documents will be effective for whatever purpose you initiated the estate planning process for – be it probate avoidance, estate tax planning, long term planning, special needs planning, or any other reason.


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