Funding a Trust is Like Filling a Box

Trusts come in all shapes and sizes. Some clients are surprised to learn that these documents are relatively nondescript in appearance. There is no need for old-style font or an embossed seal or even legal-size paper. These things have no effect on the validity of the document. What matters is 1) that your trust is as unique as your individual wishes; and 2) that your trust is properly funded.

In many ways, a trust is like a box. If someone tells you to envision a box, you may envision a gift tied with a bow, while another person may envision the stack of moving boxes in his garage. Both serve the same purpose: they hold things. Your trust may not look anything like your neighbor’s trust; however, both serve to hold, protect and transfer assets at death pursuant to the wishes of the person who created the trust.

To effectively serve its purpose, a trust must be funded. Think of a revocable living trust like a box with the cover off. You fill your box with the assets that you want your trust to control. This is likely your house, bank accounts, investment accounts, life insurance proceeds, personal property and more. While you are living, you can continue to put things in the box, take things out of the box, sell things and give them away, just as you did before you created a trust. You have complete access. Likewise, the assets in the box have no protection from creditors or taxes – Uncle Sam can also get his hands into the box.

As soon as you die, the cover gets put onto the box – the trust is now irrevocable. The assets inside of the trust are now controlled by the trust instrument. No one can get at the contents of the box unless the trust that you created during your lifetime says so. There is one predictable exception to this rule, and that is Uncle Sam. As Benjamin Franklin reminded us, “in this world, nothing is certain but death and taxes.”

An experienced estate planning attorney will not only help you create the box that best fits your goals, but she will also walk you through the process of filling your box.

For more information on trust funding, please contact us for a free consultation!