You’ve Created a Revocable Trust, Now Make Sure to Fund It!

Don't Forget to Fund Your Revocable Trust! | SJF Law Group

Congratulations! You just signed your revocable trust with your estate planning and probate attorney and have taken a huge step in protecting your family and assets. But just because you signed the trust document doesn’t mean you are done. You have a few more steps to take to make sure your estate planning is complete. You must actually fund your revocable trust to make sure that your assets pass to your beneficiaries upon your death the way that you planned for.

What Does It Mean to Fund Your Trust?

Funding your revocable trust involves transferring your assets into the name of your trust. Examples include retitling assets into the name of your trust, or naming the trust as the beneficiary on financial accounts, life insurance policies, retirement accounts, etc.

Suppose several years ago you took out a life insurance policy and named your sibling as the beneficiary to receive the death benefit after you pass away. But since then, you’ve gotten married, had children, got divorced, and signed your revocable trust naming your children as the beneficiaries. But you never changed the beneficiary on the life insurance policy, and you suffered an untimely death. Because your sibling was still the beneficiary at the time you passed away, the death benefit goes to them directly, rather than to your children under the trust like you intended to.

Creditor Protection for Beneficiaries

There are several other reasons why funding your trust cannot be emphasized enough. Revocable trusts provide creditor protection to your beneficiaries, making them great estate planning tools. When you leave property to your beneficiaries in a trust, the assets are protected from their creditors, their spouses, and their judgments. Trusts often include “spendthrift provisions”, meaning creditors are prevented from claiming trust assets to satisfy the beneficiaries’ debts. Your assets don’t have these protections like they would in a trust if you just leave them outright to your beneficiaries instead.

Revocable trusts can also ensure that your beneficiaries receive their inheritance over time, rather than in one lump sum. The trust will allow for the trustee to make distributions of trust assets to the beneficiaries for their health, education, maintenance, and support.

How a Revocable Trust Can Avoid Probate and Guardianship

Leaving assets to a beneficiary in a revocable trust will also help to avoid guardianship. If an incapacitated beneficiary who is incapacitated and unable to manage their own financial decisions received an inheritance, a court-supervised guardianship proceeding may be necessary to take control of that inheritance for the incapacitated beneficiary’s benefit. If you leave property to a beneficiary who is on government beneficiaries, receiving an outright inheritance may cause them to become ineligible for those benefits. On the other hand, if you want to leave money or property to a beneficiary who is receiving benefits, using a trust will allow for the beneficiary to continue to receive governmental benefits and not be disqualified because they are also named as a beneficiary under the trust.

Don’t Forget to Fund Your Revocable Trust

After you sign your revocable trust, unless you take these additional steps to actually put your property and assets into your trust, you have an unfunded trust. And if you pass away without having properly funded your trust, your assets may pass to your beneficiaries in a way you didn’t intend to, or to someone else altogether.

Speak to Our Estate Lawyers in Fort Lauderdale

Secure your future today. Schedule a consultation with our expert estate planning attorneys to protect your family and hard-earned assets.

Our estate planning attorneys can help design a comprehensive estate plan to prevent unwanted consequences.

SJF Law Group offers remote, virtual consultations throughout Florida.

Previous Post
Regina Drennan Joins SJF Law Group as a Shareholder
Next Post
Pros and Cons of Owning Rental Real Estate in an LLC