If you have already created an estate plan, you may have happily filed the documents away for safekeeping. You may have thought that your estate plan was complete, and you don’t need to think about it anymore. The truth is, this is only part of the estate planning process. The final step is to fund your trust. Funding a trust is the process of transferring the ownership of your assets into the trust. Failure to do this final step can render your trust ineffective.
When a loved one passes away, often spouses or family members are surprised to learn that their name isn’t on a bank account, or they aren’t named as a co-trustee or beneficiary. This vastly increases the stress for an already grieving family member. This is the last thing you want to happen and was one of the reasons you created an estate plan in the first place.
We had a similar situation in the office recently which illustrates this point.
We recently represented a widow who was the co-trustee of their Family Trust. The original estate plan had been created 30 years ago. Our client found out quickly that she wasn’t named on any of her deceased husband’s accounts as co-trustee. This meant that she was locked out of her husband’s accounts, at a time when she was dealing with the grief of losing her husband.
First, she went to her husband’s long-time accountant to correct the paperwork and submitted it to the financial institution. Unfortunately, the paperwork was completed incorrectly and was rejected and more time passed.
She was two months into this problem when she sought our help. We promptly reviewed the trust, worked with the bankers and submitted the proper paperwork. As a result, our client was added to the account and was able to access their finances.
Drafting a Trust Isn’t Enough
It is important to remember that it is never enough to just draft a trust. Once the trust is created, it must be properly funded in order to be effective. This means that assets should be retitled into the name of the trust, making sure that co-trustees are named on the documents, and beneficiaries are properly appointed. In the end, the goal is that the property is governed by the terms of the trust agreement.
In this case, it was a succession of errors that caused the client’s problem. Generally, mistakes like this wouldn’t have happened. There were mistakes made by the bank, the co-trustee as well as the accountant.
That is why it is so important to be sure that your estate documents are done right the first time. They need to be properly drafted with your goals in mind. The trust needs to be funded properly to be effective and updated periodically as situations in your life change.
When we prepare a trust, we help our clients fund their trust properly right from the beginning. We also provide written instructions that they can refer to when needed to help them if they acquire new property or want to open a new account for example.
Our law practice is focused on eliminating human error. Sometimes we can get ahead of a problem. Other times we are able to fix a problem and make a bad situation better. The day our client was in control of her finances again was a lifesaver. We are happy to help bring that peace of mind to all of our clients.