While there are plenty of options to properly plan your estate, living trusts are becoming more popular every day. Your Orange County estate planning lawyer will certainly advise you on all of your options--it may be well worth asking if a living trust is right for you. Call Parker Law Offices now for a complimentary meeting at (949) 385-3130.

Of course, there’s more to a successful trust than simply going over it on your own. You also need to adequately fund it without stretching yourself too thin by contacting and working with an estate planning attorney in Orange County.

Here are some of the top tips to help you fund your living trust

What Does It Mean To Fund Your Trust?

If you’re not familiar or you haven’t met with an estate planning lawyer in Orange County CA, it’s crucial to know what a trust is. The easy way to think about it is like a bank account that holds money, property, and other assets.

These assets are then managed by a trustee. A trustee is simply someone you appoint to help manage your trust for the benefit of the trust’s beneficiary.

In some ways, a trust is a lot like a will. Upon the trust owner’s death, the assets that make it up are then passed on to the person or people who are named in the trust.

Funding a trust is the process where you transfer your assets into it. The process includes changing the names on the titles of your assets into the name of the trust, which becomes another entity, similar to another person.

If you don’t fund the trust, you negate the benefits of creating a living trust in the first place, such as avoiding probate.

To learn more about the various kinds of trusts and which ones might be appropriate for your estate plan, reach out to an Orange County estate planning attorney.

Read below for more information about how you can make sure that your living trust can be funded successfully.

4 Tips to Fund Your Living Trust

  1. Watch Out For Real Estate Fees

One of the first things people consider adding to their living trust is any real estate they may own. This is often the right place to start, requiring the transferring of the deed into the name of the trust. 

However, if you still have a mortgage or live in a community governed by a homeowners’ association (otherwise known as an “HOA”), there are several things to consider.

First, transferring real estate often comes with a transfer tax and/or other kinds of fees. There are areas where these fees are exempt when transferring to a living trust, but that’s not always the case.

Some states even consider the transfer as a full sale at fair market value, which might mean you’ll be on the hook for extra taxes because the value of the property has been reassessed.

If your property is part of an HOA, you may also run into other financial issues. Some of these organizations require you to request permission in order to transfer your deed, which may include additional fees. It’s crucial that your decision is based upon a full and complete understanding of all of the taxes and fees involved before any of your real estate is transferred into a living trust.

It is also important to note that when the Executive administration (the President), or the Senate and/or House of Representatives experiences shifts in control by political parties, changes can be made that will impact various circumstances. These may include the passage of new laws, or enacting changes to existing laws which govern how much can be transferred to your loved ones without taxation, along with the possibility of increased or decreased taxation of assets.

  1. Avoid Early Withdrawal

Another starting point for funding your living trust involves transferring some of, or all of your bank accounts into the trust. Ultimately, this is generally a straightforward endeavor.

Check with your estate planning attorney in Orange County to learn how to properly transfer savings, checking, money market accounts and other similar assets into your trust. Most often, you’ll close the existing accounts and then transfer funds into a new one in the name of the trust.

Complications may arise if you have any kind of investment, Certificate of Deposit (CD), etc. Some of these types of account transfer transactions may be viewed as an early withdrawal. In these cases, penalties may be assessed.

One example of this involves allowing a CD to fully mature before officially transferring it’s funds into your trust. So many of these nuances are very well understood by attorneys, many of which often have strong connections to experts in the financial, banking and title industries, just to name a few.

  1. Don’t Forget Your Life Insurance

Some people don’t realize that their trust can be both the owner and beneficiary of a life insurance policy.

When the trust is the owner, it allows the trustee to control the policy in the case that you become incapacitated or pass away. For example, the trustee may need to access these funds to help pay for your medical care, and in the event of your passing, to pass along the proceeds in accord with your documented wishes.

Since the trust is your first and foremost beneficiary, it will receive the payout from your policy upon your death. Your instructions within the trust will ensure that the money will then be passed to your intended beneficiaries outside of the trust with the same protection the trust affords to your other assets.

It is wise to be careful. In some states, life insurance policies are only protected from creditors if they are owned by individual people. In these states, handing over your policy to the trust could make those funds fair game to creditors. It can be extremely beneficial if you work with your estate planning lawyer in Orange County, who can help you create a power of attorney (POA) to enable the persons you select to be able to manage the policy when you are unable to.

  1. What About Assets That Can’t Be Transferred?

There are some assets that actually can’t be used to fund your trust. In these cases, workarounds may be available that will still work for you.

For example, it’s often not wise to retitle any retirement accounts like an IRA, 401(k), 403(b), and qualified annuities.

Retitling these may well result in hefty fees for early withdrawal. Your estate may also end up having to pay income tax on them. Instead of retitling the account, the best option may often be to simply name your trust as the beneficiary of the account. That means those funds will still be available in your trust. Proper estate planning can mitigate many financial risks for your loved ones.

A Medical Savings Account (also known as an“MSA”) is another example of something that typically shouldn’t be retitled. You can designate your trust as one of the beneficiaries. With proper planning like this, people more often than not enjoy peace of mind, knowing that the right decisions are in place for those that they wish to financially be taken care of in the future.

Don’t Go Through the Process Alone

While the basic idea of a trust is rather straightforward, living trusts are complicated because of the fact that everyone’s situation is unique. It’s in your best interest to work with a professional who understands the laws in your state as well as the best methods to protect your assets.

While there are plenty of “do it yourself” articles and websites are available online, getting your estate plan processed correctly is more than worth working with a seasoned professional. What is not commonly understood, is that many of these inexpensive options often accomplish the reverse of the desired effect. Trusts and wills improperly written by non-professionals are challenged in court every day, and many of these are changed or thrown out according to the arguments presented to the judge.

If you want the best legal team on your side, why not schedule your free initial consultation with us at Parker Law Offices? Contact us now at (949) 385-3130.

Many people create a comprehensive estate plan that includes a will,  trust, and a power of attorney (POA) and then lock it away for safekeeping. Life, however, has a way of changing, and with it, the need to keep these important documents updated with the help of an estate planning attorney in Orange County.

When major life events occur, it's time to review your estate plan with an Orange County estate planning attorney.

Life Changes that Warrant a Review of Your Estate Plan

In addition to a recommended review every three years, changing family circumstances that warrant a revisit and possible update of your estate plan include the following:

Second marriages can be particularly challenging when determining how assets are divided. If you have children from a previous marriage, there is no guarantee your present spouse will provide for them after you are gone.

You can, however, make provisions for them in your estate plan

There are multiple documents to consider including life insurance policies, retirement accounts, wills, and trusts. For obvious reasons, it's vital that you update your estate plan with an estate planning lawyer in Orange County CA as soon as possible.

MarketWatch reported on several horror stories involving unchanged beneficiaries. One involved a man that had failed to change his beneficiary after a recent divorce — instead of the benefits from his pension and life insurance going to his kids from an earlier marriage, they went to his ex-wife.

In addition to updating beneficiaries, it's important to include guardianship designations. As part of your will, this important document specifies who will raise your children should something happen to you.

A change in assets can also affect estate taxes which may leave your beneficiaries with more tax burdens than you anticipated.

Estate tax laws are particularly volatile. As a reliable Orange County estate planning attorney, our team notifies our clients when changes in state or federal law affect their estate plans. 

Find the Right Estate Planning Lawyer in Orange County

Estate plans are commonly amended several times over the course of their existence. If you or your loved ones have experienced one of these life-altering events, or it's been several years since you've reviewed your estate plan, consider speaking with an estate planning attorney in Orange County today. 

There are few things worse than a family facing the death of a loved one as well as a failed estate plan. Our experienced Orange County estate planning lawyer can help you review your estate plan and ensure it reflects your current wishes.

For a complimentary consultation, contact us at Parker Law Offices today.

Contact Us

If you have any questions and would like to make an appointment for a consultation, fill out the form and we will get in touch with you shortly.
logo
Estate Planning Attorney in Orange County, CA
Wills & Trusts, Estate & Trust Administration, Probate, and Health Care Power of Attorney
© 2024 Estate And Trust Lawyer. All Rights Reserved.