Living Trusts have become popular as a mechanism for succession planning. As the American population ages, and baby boomers enter their golden years, more people seek information about Living Trusts. One of the most common questions we receive is about funding a trust. Here are some common questions and answers about funding a trust.
Question: What does it mean to “fund a trust”?
Answer: A living trust is an entity separate from its creator. It can hold property for the beneficiaries. In order to hold the property for the beneficiaries the property must be held by the trust. Property that has a title, such as the family home and other real property, is not held by the trust until it is transferred, by a deed recorded at the county recorder’s office, to the Trustee of the Living Trust.
Question: Why is funding your trust so important?
Answer: One of the main advantages of having a Living Trust is that when you die, the property held in the Trust does not go through probate.
Question: What is probate?
Answer: Probate is a judicial process that involves the court determining whether a Will is valid and overseeing the distribution of deceased person’s estate assets to their designated heirs. Creditors are also paid through the process.
Question: How does avoiding probate help your heirs?
Answer: There are many reasons why it may be beneficial for your heirs to avoid probate. Perhaps the most often cited reason is cost related. Establishing a Living Trust and avoiding probate generally saves the estate thousands of dollars in attorney’s fees. Another reason is that probate is public. The descendant’s personal estate information is open to the world. Anyone can easily challenge the probate if they believe they have a claim against the estate or don’t agree with the Will. In this way probate is an invitation to challenge the estate. Another compelling reason is that most people would prefer that their heirs are not required to attend court, which can be stressful. Also, probates can take months or sometimes years to complete. Your beneficiaries won’t have to wait before receiving the property left to them if it’s transferred from a Trust rather than through a probate court.
If you have a Living Trust, or plan on establishing one, the LivingTrustSource.com recommends that you have a qualified attorney assist you in identifying assets that must be transferred to the trust to avoid probate. The proper funding of your Living Trust will help ensure your assets pass quickly and smoothly to your beneficiaries.