CONTRIBUTED CONTENT — Two of the major benefits of using a revocable trust as part of your estate plan are avoiding a conservatorship in the event you become incapacitated and avoiding probate at your death.
In order to obtain these benefits, you need to do more than just make and sign a trust agreement. You must also transfer or coordinate the transfer of assets to your trust. That process is called “funding” your trust.
When your assets are titled in the name of the trust, the trustee of your trust can manage those assets under the terms of the trust agreement. Typically, you will act as the trustee during your lifetime while you are competent. In the event you become incompetent – or at your death – the next named trustee will step in to take control of your assets and follow the instructions you have given in your trust.
During your incapacity, that trustee can manage your assets for your benefit during your lifetime. At your death, the trustee can distribute your assets to your heirs or retain your assets in further trust as you have instructed in your trust agreement.
However, your trustee only has control over assets that you have actually transferred to or coordinated with your trust. For example, if you leave your house in your own name but transfer other property to the trust, the trustee will not have the power to maintain or sell your home if necessary. The trustee would, however, have power to manage the other assets in the trust.
In that event, a court would have to appoint a conservator if you are incapacitated or a personal representative in a probate proceeding if you die in order to authorize someone to manage, sell and distribute your home. Those court proceedings would be absolutely avoided if you were to transfer your home – and other property – to a properly prepared trust.
Transferring assets or coordinating your assets to work with your trust will require some effort. Deeds to real property must be prepared and recorded, signature cards at banks must be changed, investment and brokerage accounts must be re-titled and stock and bond certificates must be reissued. Beneficiary designations of life insurance, retirement accounts and annuities should be evaluated with your attorney and financial professionals to coordinate those with your trust.
An attorney can ensure your transfers and beneficiary designations are done properly and advise you as to any issues of which you may not be aware. Special income tax considerations exist in handling qualified retirement plans, for example, and there are exceptions for small accounts and a certain number of cars and recreational vehicles that may apply to your situation.
Despite the time and expense incurred in following through on the transfer of your property to your trust, it will be well worth it to your family and heirs should you become incapacitated and at your death.
Sean Sullivan, Andrew McCullough, Shelbi Post and Amy Nicholls are part of the estate planning team at the firm Brindley Sullivan, PLLC. Call 435-673-9220 to arrange a free consultation to discuss your estate planning needs.
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- Brindley Sullivan | Address: 50 E. 100 South Suite 302, St. George | Telephone: 435-673-9220 | Website.
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