Funding a trust is critical when you have a trust-based estate plan.
A trust is a receptacle, like a bucket. Before you fund the trust, it’s like the bucket is empty. Once the Trust is funded it carries everything that has been put inside it with ease.
You fund a trust by retitling assets into the name of the trust. Let’s say you have several items that you want in the trust. Let’s say you have a house, and a bank account that you want to go to the trust. You fund the house and bank account to the trust, but forget about another asset. Maybe it’s an asset you don’t see frequently and it completely slipped your mind. The house and bank account placed in the trust and will avoid probate. The asset you forgot isn’t in the trust and will need to go through the probate process (assuming no non-probate transfer process applies to it, such as a beneficiary designation).
In Massachusetts probate can be a costly and time-consuming undertaking, depending upon the nature and extent of the assets subject to probate. Typically, if it’s not real estate, a small amount of assets can pass through probate using the express lane of Voluntary Probate where the formalities are loosened.
When setting up a trust-based plan it is important to draft a will to catch any forgotten assets.
The Pour-Over Will might move the assets into the trust at death, but that would be through the probate process. This should be used in a last resort as you should aim to fund the trust while you are alive so that your Personal Rep does not miss any assets.
Funding a trust is essential. Otherwise, the trust is like an empty bucket. Also, you would have lost any lifetime benefit of the trust, such as management of the assets during a period of incapacity.
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Thomas F. Williams
Thomas F. Williams graduated from Boston University in 1969 with a degree in government and economics.
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From Our Law Blog
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