I recently had the opportunity to sit down with a family at my office in Brentwood and I spoke to them regarding their living trust that was set up by another attorney out-of-state back in 1996. First, before I get into the topic of this article, whenever you move states it is a good idea to have your estate plan and trust reviewed by a knowledgeable estate planning attorney in that state. Also, you should really have your estate plan reviewed once every three years.
During the conversation with this family I realized that there were several items that they needed and wanted to have changed with their existing living trust. Also, this family had several assets that were never titled in their living trust.
Which brings me to the purpose of this article ... What Is The Number One Reason Why Some Living Trusts Don't Work?
The answer is simple ... the number one reason why some living trusts don't work is because of lack of proper funding or no funding at all.
I am continually amazed when I have clients call my office to have their living trust reviewed from many years ago and the funding of the living trust was not completed, or worse, the living trust was not funded at all. If you do not fund your living trust with assets titled in your name, your living trust will not even be worth the paper it was written on. An unfunded living trust is worthless and the estate will still have to go through probate. I have seen many, many cases where there was a living trust when someone passed away and the family still had to open a probate estate and spend considerable time in the administration of that probate estate.
The following is a list of assets that, depending upon your circumstances, that should be retitled in the name of your living trust:
1. Real Estate
2. Investment Accounts
3. Personal Property
4. Business Interests
5. Mutual Funds
6. Bank Accounts (depending upon your specific situation)
7. Life Insurance Policies With a Cash Surrender Value
In addition, you may want to consider changing the beneficiary on certain accounts following the death of your spouse if you have a living trust, including:
1. Life Insurance Policies
2. IRA Accounts
When you considering which law firm to select to set up your family's living trust, or whether a living trust is right for your family, you should always ask the attorney the following questions:
1. How Many Living Trusts Have You Set Up?
2. Do You Advise Clients Regarding Trusts on a Regular Basis?
3. Do You Have Experience With All Types of Trusts Including Irrevocable Trusts?
4. Does The Cost You Quoted Me Including the Funding of the Trust? If Not, What is the Extra Costs for the Funding of the Trust?
5. If You Don't Cover the Funding of the Trust, Do You Provide Any Assistance or Direction So That We Can Do The Funding?
Each one of these are very important questions to ask any attorney that you meet with. The attorney should be knowledgeable, should be able to say that he or she has dealt with your specific type of legal issue before, and should be able to say that we do the funding, or that we can assist you with the funding process of your living trust.
At least at our law firm, we include the funding of the living trust in any fee that we quote to our clients. We believe that the estate planning process is not complete with a living trust until the funding is complete. We also include a Trust Funding Manual to our clients so that down the road, should they acquire any new assets that need to be retitled, our clients will know exactly what they have to do to fund their new asset into their living trust.
If you have questions about living trusts or wonder whether a living trust is right for you and your family, please contact our office at (615) 472-2482 or e-mail us at [email protected] to schedule an initial consultation.
Everyone who calls our office to schedule an initial consultation will also receive a copy of my book "Estate Planning for Tennessee Families: How to Keep 100% of Your Estate in the Family."