Estate Planning Mistake: Not Funding a Trust | Why You Need to Fund Your Trust

One of the big mistakes of people with a Trust is, not funding their Trust. If we don’t have assets tied to the Trust, like your life insurance, checking, savings, IRA, 401(k), then it is very easy for these assets to fall into probate. Estate Planning is not a one-and-done type event. That’s why you need to make sure to fund the Trust properly when you set it up and make sure that it continues to be funded as life goes on. Otherwise, that Trust is not worth the paper it’s printed on.

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via thisĀ linkĀ or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.

With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.

 

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Episode Transcript

Estate Planning

Hi, this is Chris Berry, and we’re going to talk about the estate planning mistake of not funding your Trust. If you like this information, please make sure to subscribe to our YouTube channel.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Ford’s, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and has authored the Amazon best-selling book, The Caregiver’s Legal Guide.

So one of the big mistakes we see, and this happens, I’ve seen it over the last 15 years of doing this, is that a client will have a Trust but they won’t have the Trust funded properly. This is something that we take very seriously at our office, where we have a whole team helping our clients to make sure that if they do have a Trust set up, that it’s funded properly. So, two pieces to this. One is what is a Trust? Think of a Trust kind of like a suitcase. While you’re alive and well, you’re holding on to it. God forbid something happens to you, you pass the suitcase, passed this Trust onto your successor Trustees who then distribute the assets to the named beneficiaries.

 

Trust Funding

Now, if a Trust is like a suitcase, we need to make sure their stuff actually in the suitcase. That’s what we mean when we’re talking about funding a Trust, is we’re making sure that there’s actually assets titled in the name of the Trust as we pass that to the next generation or to whoever the successor Trustee is. Because understand if we don’t have the Trust funded, meaning we don’t have the assets pointing to the Trust, changing beneficiaries like your home, maybe we do a Lady Bird Deed, changing beneficiary designations for life insurance, checking, savings, 401(k)s, IRAs, if we don’t have these assets tied to the Trust, then it’s very easy for an asset to fall through the cracks and to end up going into probate. That’s what we want to try to avoid at the end of the day.

So that’s why we think it’s so important that if you do have a Trust-based estate plan, A, not only make sure the Trust is funded properly when you set up the Trust, and a lot aren’t, a lot of times attorneys just give you a funding letter, which we call a CYA letter or cover your butt letter, because they give this to families with the idea that if you don’t fund the Trust and you pass away, now the kids get upset because assets go through probate. The attorney can point to that funding letter to say, “Hey, client, you were supposed to do this.”

We don’t think that’s the right way to approach things. That’s why we work hand in hand with our clients to make sure everything is funded properly. So A, make sure when you set up the Trust that it’s funded properly. And then, B, make sure as life goes on, you accumulate maybe more assets, you sell a house, you buy a cottage up north, you need to make sure the Trust continues to be funded properly. That’s why estate planning is not a one and done type event. If you have a Trust, you need to make sure that it’s funded properly when you set up the Trust. That’s why we have an annual program to meet with our clients, to review their Trust, review their estate plan, to make sure that if they have added any new accounts, opened up any new accounts or bought a piece of property up north, to make sure that it’s funded in the Trust. So it’s important, A, to have a Trust. But if you have a Trust, it’s even more important to make sure that Trust is funded properly. Otherwise, that Trust is not worth the paper it’s printed out.

So hopefully that’s helpful. Understand that if you do have a Trust, make sure your Trust is funded properly. If you have questions on this, feel free to reach out to our firm. This has been Chris Berry with Castle Wealth Group. Take care. Thank you.

Castle Wealth Group has clients across the nation and helps families plan, protect, and preserve what is important by creating a Retirement and Legacy Blueprint.

 

 

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