Un-Funded Trusts

Many of the people we meet with have made the decision to set up a revocable living trust (RLT). This probably isn’t surprising, given we are estate & elder law attorneys, but what is surprising, is the number of times we hear individuals or couples have established a trust and NEVER got around to funding it, they are disappointed and feel misled by their previous representation and are coming to us for help.

Un-Funded Trusts

One possible reason for this is that it can be a time-consuming process. But, most of the time it is because clients were under the impression that funding was almost complete at the time of signing a trust or that the attorney hired to establish the trust was going to do it afterwards.

RLT’s go by several different names. Over the last few years, it seems every law firm has branded their own term that fits their own clientele. This is good marketing, but often confuses clients into thinking they are getting an entirely different product. Some names I’ve recently come across were Legacy Trust, Wealth Preservation Trust, Estate Trust, and the list goes on. Rest assured, these products all “basically” can do the same things, customized to a specific client’s situation. Some of the benefits of RLT include the ability to continuously control assets during and after your lifetime, provide for children of any age, avoid the costs, publicity and burdensome process of probate proceedings, and limit your federal tax burden. However, with increases in the Federal Estate Tax Exemption, tax planning has become less of a focus.

It’s important to know that none of these benefits will be realized if the trust is never funded. This is especially unfortunate since the concept of funding is fairly simple. Funding includes changing the names on assets such as financial statements or the title to a house or car, to the name of your trust. It also entails changing beneficiaries on financial accounts and other non-title assets to the trust. Title, insurance and financial organizations can be helpful in assisting their clients with these changes, but after someone dies, they often can be difficult to work with, frequently going beyond their own legal requirements to make these changes for their customers. As the saying goes, they love taking your money, but when it comes to giving it back, “good luck.”

Many Estate planning attorneys that write RLTs for their clients do not fund trusts after they are executed and if they do, charge additional fees. This is because the time involved funding trusts is unpredictable, as institutions have different requirements, and these requirements seem to change daily, depending on who you talk to on a given day.

Setting up an unfunded trust is like buying a car, and not putting any gas in it. Before discussing a trust, make sure you check to see if the tank is full. Make sure you’re able to get where you want to go when it counts. Many attorneys will talk about the wonderful features of a trust, but never put anything in it, that will help you do what you thought you had planned for it to do.  

Berger Estate & Elder Law P.A. has been finding solutions throughout Kansas City for over 30 years providing Trusted Counsel with Proactive Solutions for many. We’ve been helping our clients establish trusts tailored for their desires and needs and being upfront about trust funding, doing it for you or helping you every step along the way. Give us a call today at (913) 491-6332, visit our website berger-lawfirm.com or stop by our conveniently located offices at 11233 Nall, Suite 140 Leawood, KS 66211 for more information.

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