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Funding And Administration Of Your Revocable Trust

Many clients are thoroughly impressed with their attorney’s ability to skillfully craft a detailed trust document to outline their estate plans. However, the biggest mistake that clients make after having that comprehensive trust created is that they fail to fund their trust. Indeed a trust is effective the moment you leave your attorney’s office assuming that it is executed in the proper formality of the state’s laws where it is created. Yet, despite many attorneys who discuss the funding requirements for a trust, unfortunately, many trust clients never get around to the process of funding it. The reason is obvious: It is time-consuming and often cumbersome. Without proper funding, trusts are often deemed null and void and may require extensive legal maneuvering to either be recognized or even revoked. Therefore, it is extremely important that the trust is not only skillfully crafted, but also properly funded.

The following are some tips on making sure your trust becomes effective:

1. Transfer some or all of your property (stocks, bonds, cash or real estate) into the revocable trust as soon as practicable.

2. Use the proper process for transferring the assets. For example, real estate must be transferred by deed, bank accounts are transferred by name change and stock is transferred by issuance of a new certificate.

3. In order to obtain the benefits of probate avoidance, disability protection and all of the other benefits that we have discussed, it is very important that the revocable trust be properly funded during your lifetime. To obtain maximum benefit from the revocable trust, you should transfer all of your property to the trust as soon as possible.

4. Discuss the new trust document with your financial experts, your portfolio manager, your life insurance agent, etc. Make sure they know you have created a trust and that they offer to help you make the necessary changes to the assets which they manage.

5. Be sure to title the assets properly. There are several ways to do this. Try to include the date of the trust whenever possible and be thorough. By providing a copy of the certification of trust to the entity changing the title, the title will most likely be picked up correctly.

6. Have your attorney prepare a Certification of Trust which enables you to avoid disclosing the particulars of your estate plan by disclosing only the information which is necessary for re-titling.

7. Homestead property can be transferred into a trust, but the instrument used for the transfer must contain specific language to prevent losing the “homestead” nature of the property. The county property appraiser’s office is very particular about this and should be contacted when in doubt.

8. Revocable trusts are set up to be a pass-through entity for income tax expenses. This means that all income/expenses are taxed in the same way, as if the trust does not exist. A social security number can be used as the tax identification number of the trust during your lifetime. Competent tax advice is recommended when setting up a trust.

9. After changing the names of assets to include the trust, be sure to confirm that the financial institution has followed through, and require proof of the name change.

10. Vehicle titles should generally not be altered, as sometimes the transfer of a vehicle results in higher insurance rates which is typically not advisable.

Contact the attorney who prepared the trust periodically, at least every few years, to review your assets and living situation to see if there needs to be any changes to a trust. Marriage or divorce is often a reason to update your estate planning documents.

If you need help with your estate planning needs, call us today at 813-279-6180. We have offices in Tampa and Clearwater, Florida.