Many Washington residents are aware of the benefits of establishing a trust. These estate planning tools are among the most popular options for families who are looking for a way to hand down assets with minimal loss due to taxation. However, in order to reap the benefits of a trust, it is important to understand how they work. It’s also crucial to ensure that the trust is properly structured and funded so that it might serve its intended purpose.
The initial stages of setting up a trust involve meeting with an estate planning attorney and reviewing the available options. Different types of trusts serve different purposes, and each individual or family must select the tool that is right for the specific needs. Once the type of trust has been determined, the next step in structuring the trust to meet the intentions of the grantor(s.) This is where specific instructions regarding the handling of assets and the distribution of funds are laid out, and where beneficiaries and trustees are named.
Finally, in order for trust to be effective it must be funded. Funding involves transferring assets into the trust. This process transfers ownership of those assets out of the hands of individuals or companies and into the trust itself. That means that those assets are protected from loss due to litigation, liens, divorce and other matters.
Unfortunately, a small number of Washington residents will go through all of the steps required to set up a trust, yet fail to actually title assets into the trust. An unfunded trust is unable to provide the benefits outlined above, and can be a source of estate planning frustration to loved ones left behind. Those individuals will be asked to comb through all applicable assets, working to determine how the deceased individual planned for the assets to be handled. In the end, many families are forced to go through the probate process before assets can be distributed, all because a trust was set up but never funded.
Source: nwitimes.com, “Estate planning: Unfunded trusts“, Christopher Yugo, May 7, 2017