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The Importance of Funding Your Living Trust

If you want to spare your loved ones the headaches of the probate court process after your death, you may wish to consider creating and funding an Arizona living trust. A living trust can spare key assets of an estate from inclusion in the probate process, but only if it’s organized correctly and then actually funded properly with the assets that are part of the estate. This post will take a closer look at what you should know about funding a living trust before making that critical leap.

A living trust is a structure designed to assume legal ownership, either immediately or at the time of your death, of the assets you assign to it. While you’re alive, you’re the trustee and responsible for the maintenance of the trust, but you will have named a successor to take over this responsibility upon your death. This successor will then oversee the organization, protection, and distribution of your assets according to your stated wishes.

Unlike an irrevocable trust, a living trust may be revocable (before your death) and can be amended throughout the course of your lifetime. Not every Arizona resident needs a living trust to avoid probate; for instance, low-value estates, (totaling $75,000 or less) don’t require probate. Some types of assets, such as community property, may also escape the reach of the probate court process. However, any eligible assets that tip the balance over that low listed threshold bring probate into the picture.

Assets placed in a living trust are exempt from the probate court process, but this transfer doesn’t automatically occur simply because you created the trust. Once the living trust has been created, it still must be funded in order to be fully effective. If this step hasn’t been properly completed at the time of your death, your estate will probably initiate the probate cycle, trust or no trust – rendering useless all the time, work and money you’ve put into trying to avoid it. In order to properly fund your trust, you and your financial advisor must make 100 percent certain that you have correctly funded such key assets as:

  • Retirement accounts
  • Real estate
  • Insurance policies
  • Business and bank accounts
  • Investment accounts

Which of your assets do you assign to your living trust, and at what point do you do so? Some items may not go into a living trust right away, some will go into your trust after your death, and others may never go in at all. It’s impossible (or at least highly inappropriate) for an attorney to try and advise you on every account, asset, retirement plan, and insurance policy to be funded into in your living trust. Instead, we urge our clients to communicate with their financial advisors regarding each of these specific assets to receive detailed answers applicable to their specific situations.

When properly implemented and funded, a living trust will save your survivors much unnecessary stress. Attorneys can create the correct legal structure and framework necessary for the trust, but ultimately it’s up to you receive the greatest benefit by properly funding that trust. We encourage you to ask your financial advisor what steps you need to take – and then make certain that you’ve taken them.

© 2018 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.