Funding the trust critical to successful estate plan

Many articles are written about the difference between wills and trusts.  The estate planning method that is best for you will vary depending on your individual circumstances.  But if you choose a trust, it starts out as an empty shell.  In order for the trust to work correctly during your lifetime and after, properly funding the trust is crucial.

“Funding the trust” simply means that you add assets to the trust.  When you die, if all of the assets you want to pass on are not in the trust, then those assets will have to be transferred another way.  This usually means that those assets will have to go through probate.  One of main reasons that people choose to have a trust rather than a will is to avoid probate.  So if your trust is not properly funded, it will not achieve that goal.

When you create your trust, you can create a “pour-over will” which, as it sounds, will pour any leftover assets into your trust.  You basically leave everything to your trust.  This will at least get the assets into your trust, but the pour-over will may still have to be probated to properly transfer the assets into your trust.  It works better than nothing, but the best course is funding the trust with all of the assets that should be in it.

Some assets shouldn’t go into the trust.  Generally, anything that would be distributed outside of probate such as life insurance policies, annuities, and retirement accounts don’t need to go into the trust because they have a named beneficiary.  There are certain trusts that can be created for funding the trust with some of these assets but they are highly specialized when compared to a revocable living trust.

When your trust is created, an estate planning attorney can help you understand what assets to use for funding the trust.  A properly funded trust can be valuable to your heirs by helping them avoid a long and complicated probate process.

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Stephen Waltar

Attorney at Legacy Estate Planning, LLC

Steve was born on March 15, 1962, in Boston, Massachusetts. His true roots, however, are firmly planted in the Pacific Northwest. Steve grew up in Richland, Washington and moved to Seattle in 1980 to attend college (Seattle Pacific University, B.A., cum laude, 1984). He lived in Princeton, New Jersey for three years during graduate school (Princeton Theological Seminary, M.Div., 1988). Steve returned to Puget Sound to attend law school in Tacoma (University of Puget Sound/Seattle University, J.D., 1993). He was admitted to the Washington State Bar in 1994. Steve is also admitted to practice in United States District Court, Western District of Washington.

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