In this Elder Law Minute, Paige Fox explains why funding your revocable living trust is essential to ensure it works and avoids probate.
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Video Transcript:
Hi. My name is Paige Fox. I’m a Senior Associate attorney here at Dent Coulson Elder Law. And I understand these topics are very complex, so I’m hoping these Elder Law Minutes can bring some insight and some more understanding to both potential clients and current clients. Thank you.
Today we are here to discuss the importance of funding your revocable living trust. I have come across numerous clients who come in with a prior estate plan, and they say that nothing has been transferred into their living trust. And I often say, you know, this is the most important step because while we are able to assist with the drafting, and also we are able to assist with transferring any real property into your trust, it is the client’s responsibility to go around to the different financial institutions and banks to transfer their other assets into their revocable living trust.
And in fact, if you create a revocable living trust of any type, and then you do not put your assets into that trust, essentially it’s a stack of documents that are completely useless. That being said, that is why it is so important to fund your revocable living trust.
So when we do it as an estate plan, the typical next steps would be to: you get everything drafted, review the documents with the attorney, make sure that the terms of the document are exactly how you wish. Our office will handle transferring your real property into trust via a deed into trust. However, since we cannot go to your different financial institutions or talk with your accountant or financial advisors, it is your responsibility to then contact them and say, we created a revocable living trust. We need to put this asset into the trust. They should know exactly what you mean when you say that.
And oftentimes, all the financial institutions have different forms that they have that you will need to fill out. And the way that you will be able to tell that your account is then put into your living trust is that instead of having your individual names listed as the owner, it will have your name listed as the co-trustee or trustee of your living trust.
The types of assets that cannot get transferred into your living trust are things like retirement accounts and life insurance policies—things that are directly connected to your life expectancy. So while you cannot transfer those assets into the trust, it is possible to name the trust as beneficiary of those assets.
I am by no means a tax expert, so I definitely recommend discussing these decisions with your accountant, as there are a lot of tax consequences related to naming the trust as a beneficiary of the IRAs. So almost always, we would recommend that you name your spouse, if relevant, as the primary beneficiary of your IRA or any retirement account just because of the SECURE Act changes back in 2020 that give a lot of benefits to spouses over other beneficiaries.
However, if you are naming a secondary beneficiary of the IRA, it is possible to name the trust as beneficiary, or you can name individuals as the beneficiary. But outside of retirement accounts and life insurance policies, I recommend transferring as many of your assets as possible into your revocable living trust. And that is what avoids probate.
And if you are looking for assistance in updating your estate plan, or if you have questions on funding your current revocable living trust, feel free—
Thank you for watching our Elder Law Minute. If you need help with powers of attorney or any other estate planning needs, please call Dent Coulson Elder Law.
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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 (IL) or (314) 567-9292 (MO), or Contact Us and we will get in touch as soon as possible.
