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A Reminder: Keep Funding Your Revocable Trust

As you know, we have many estate planning tools available in Kansas to help avoid the need for probate. Probate can be an expensive and time-consuming task that requires the assistance of an attorney and can take away from the assets meant to be transferred to your loved ones. One of the probate-avoidance tools we often use is a revocable trust.

A revocable trust is a powerful estate planning tool that can help you avoid probate, control your assets during your lifetime, and provide for your loved ones after your death. When a trust is created, we spend some time transferring ownership of your assets into the trust, which then controls distribution of those assets. However, it is important to remember that a revocable trust is only effective if you continue to fund it as you acquire new assets. Any assets left out may be calculated into your "probate estate" after death.

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Here are some of the reasons why you should continue to fund your revocable trust:

  • To avoid probate on higher-ticket assets: Probate is the legal process of transferring your assets to your heirs after your death. It can be a time-consuming and expensive process--and it can also be public, which can be a concern for some people. When you have even one asset or account greater than a certain threshold, probate may be required. By funding your revocable trust with your assets (such as re-titling or re-deeding property in the name of the trust), you can avoid probate altogether.

  • To maintain control of your assets: As the settlor/grantor (meaning the person who put the assets in it) of a revocable trust, you have the power to change the terms of the trust or revoke the trust altogether at any time. This means that you can continue to control your assets during your lifetime, even if you have named someone else as the trustee. You can amend the management or distribution of assets as you go by amending the trust's terms.

  • To provide for your loved ones: A revocable trust can be used to provide for your loved ones after your death. You can specify who will receive your assets and how they will be distributed--including setting limits on the amount or timing of distributions for any loved ones who need those limits. You can also set up trusts for minor children or disabled beneficiaries. For the most part, you cannot necessarily control distribution of assets that are not funded into the trust.

Trust Maintenance

If you have a revocable trust, it is important to review it periodically and make sure that it is still up-to-date. This includes adding any new assets to the trust and making any necessary changes to the beneficiaries. You should also work with an estate planning attorney to ensure that your trust is properly funded. When you make these periodic changes, inform your successor trustee--the one(s) who will actually make the distributions to others after your death, similar to an executor--that you have made changes and let them know why you did it.

Here are some tips for funding your revocable trust:

  • Transfer title to your assets to the trust: This can be done by retitling your property, such as your home, car, financial or bank accounts, in the name of the trust. Real property (real estate) will require recording with the register of deeds in the county where it is located.

  • Make gifts to the trust: You can also make gifts to your trust by transferring cash or other assets to the trust, including those received from others as a gift or inheritance.

  • Pay trust expenses from your own funds: If you are the trustee of your own trust, you can pay the trust's expenses from your own funds. This will help to keep the trust's assets intact. Check with your accountant or tax preparer for more information.

  • Utilize hand-written tools: Remember to "fund" new personal items into the trust as well. You can do this using a form from your attorney where you name an item, place it in the trust, and say to whom or in what manner you want it later distributed.

  • Be aware of time limitations: If you are of advanced years or declining health and are likely to need long term care in the near future, talk to your attorney about how this might affect trust assets. While trusts have long been used as an asset protection tool, a living trust cannot necessarily shield assets from the State if you require the assistance of Medicaid. Ask an elder law specialist for more information.

Does everyone need a trust?

The simple answer is no, everyone does not need a trust. There are many people who have simple estates for which other probate avoidance devices are perfectly adequate. Houses and land, titled vehicles, bank accounts, insurance policies, retirement accounts, and other assets can all be handled outside of probate with proper planning and by filing certain documents with the state or county.

If, after consulting with an attorney--and NOT simply with a friend or a salesperson--you have found that a revocable trust is the way to go, you can use some of the tips in this post to keep the trust funded. By remembering these tips, you can ensure that your revocable trust is properly funded and that it will be effective in achieving your estate planning goals.

If you have any questions about revocable trusts or estate planning, please consult with an estate planning attorney. If you do not have an estate planning attorney, I would be happy to meet you! You can request additional information here.

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