Establishing a living trust without funding it is a lot like buying a house and then not furnishing it, or buying a car and not putting fuel in it. What’s the point? Your Estate Planning Attorney can draft a comprehensive revocable living trust with a pour-over will to help you avoid probate and plan for incapacity. However, it’s little more than a useless piece of paper if the trust isn’t funded properly.
It’s never too early to start financial planning, and a visit to an Elder Law Attorney near you is your first step toward a successful financial plan. It’s easy to get overwhelmed, so take a breath and make some notes about your biggest concerns. Talking through some key questions will help you gain confidence and ensure your trust-based estate plan will work for you.
What is a Trust Fund and How Does It Work?
A trust is a legal arrangement that allows for the transfer of ownership of your assets to your beneficiaries. Assets can include money, real estate property, investment accounts, and businesses. There are three participants in every trust:
3 Key Participants in a Trust
Grantor
Trustee
Beneficiary
If you create a trust, you are the Grantor. You name a Trustee who will manage the assets in your trust and carry out the requirements when you are no longer able. Finally, the Beneficiary is the person (or persons) who will inherit and receive the assets in your trust.
Is There More Than One Kind of Trust?
There are many different kinds of trusts in Florida, each one serving a different purpose. From revocable to irrevocable, all the way to Pet Trusts, you can provide for your family members and save time and financial resources. A seasoned Elder Law Attorney can explain your options and advise which will work best for you. However, like a car without fuel, a trust doesn’t go anywhere without funding.
Some Examples of Different Trusts in Florida
Revocable trust
Irrevocable trust
Special Needs trust
Pet trust
Is There a Difference Between a Trust and a Trust Fund?
The difference is ever so slight, but important in understanding estate planning. A Trust is an agreement that specifies how assets will be managed and distributed. A Trust Fund is the entity those assets are placed into when the trust is created. These terms are often used interchangeably as the creation of a trust and a trust fund are often discussed together.
How Do I Fund a Trust?
Your trust is a document that outlines your wishes regarding your assets. However, until you act on those wishes, it’s just a comprehensive plan that looks good on paper but can go no further. You fund your trust by legally assigning or retitling assets into the name of the trust.
Financial Accounts
When you are ready to change the name on your accounts to your trust, bring a copy of your trust or the Certificate of Trust to each financial institution. You will change the name on each bank, brokerage, and money market account you want to add to your trust to the trust name. After you make the change, double-check all your account statements to be sure the name of the trust is now the account holder.
Your Estate Planning Attorney can provide guidance on how to transfer bank or investment accounts into your trust. Real estate property can be tricky, but your local attorney will know the requirements in Florida. In fact, some Estate Planning Attorneys are full-service – drafting your trust and providing trust funding services to be sure your carefully crafted plan is executed properly.
Are Trust Funds Only for Wealthy People?
The short answer to this question is no. Anyone can create a trust fund to grow their wealth, avoid certain taxes, protect their assets, and avoid probate when transferring their estate to their beneficiaries. Even a “trust fund baby” isn’t necessarily rich – they just had parents or grandparents who wanted to pass along their assets, sizable or not.
A revocable living trust can grow and change as you experience life events. Start your trust funding as a young, single person and make updates as you move through the stages of your life. Marriage, children, home ownership – all can be easily updated into your trust. Your Elder Law Attorney stands by you, advocating for your rights, during all the changes in your life as you prepare for old age.
Do Trust Funds Make Money?
In some situations, yes. If they hold assets that produce income, like a savings account, it will continue to produce interest in the trust. The biggest benefit of a trust fund is the guarantee that your assets are well-managed until distributed to your beneficiaries.
Can I DIY My Trust?
Please don’t. Preparing trust documents and providing peace of mind for your family is not the place to save a few pennies. If assets aren’t transferred properly or – worst case scenario – left out of the trust, they could be distributed to creditors rather than beneficiaries. Legal documents are best left to the professionals – it may be cheaper to DIY, but it’s not worth the risk.
The first step of a solid aging plan is a consultation with a trusted Elder Law Attorney. You are in a protected and confidential relationship with your attorney, so it is important to put everything on the table to receive the very best guidance. Your elder law specialist will be your advocate for years to come and wants to create a successful plan for you and your family.
Elder Law Attorneys are comforting and detail-oriented right when we need it most, which are two reasons they are a Resource We Love. Learn more about how establishing a trust and fueling it with funds can be a strong part of your estate plan in the Legal and Financial Section of our Blog.