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Properly funding trusts an important task in estate planning

Trusts can be useful tools in estate planning as they are very versatile and can be tailored to the needs and goals of each individual. Complicated estate plans involving tax minimization and asset protection strategies often make use of trust arrangements. Though trusts cost money to set up and administer, these costs may be worth it when compared to the potential costs of probate.  

That having been said, trusts must be properly drafted and set up, and fitted within an overall estate plan in order to effectively serve their purpose. One potentially costly mistake when it comes to trusts is failure to properly fund a trust. When a trust isn’t properly funded, the purpose of the trust can be frustrated and the benefits of having set up the trust are lost. 

There are different ways to go about funding a trust. Looking at the options, a settler can choose from assets held solely in his or her own name, assets with beneficiary designation, and assets held jointly with the right of survivorship. Exactly which assets a settler uses to fund a trust depends on the assets available and the goals of the estate plan.

All things being equal, a special focus in funding trusts may be put upon assets held solely in the settlor’s own name, since these are most likely to be subject to probate upon the settlor’s death. Jointly held assets with the right of survivorship, and assets with beneficiary designations, can also be used to fund trusts as well, and these may be preferable in some cases. In some cases, there may be assets that it is not preferable to transfer to a trust or which may not be able to be transferred to a trust. Working with an experienced attorney helps ensure that careful consideration is given to all relevant factors in this decision.

In our next post, we’ll look at the importance of funding a specific type of trust: trusts for the benefit of special needs children. 

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Tannenbaum Scro, P.L.
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