Why is trust funding so important to regular estate plan updates?

Trust funding is perhaps one of the most important aspects of any estate plan. If you create a trust to avoid probate, manage your assets, or save money on taxes, ensuring that it is properly funded is the key to the trust’s success. When you modify and update your estate plan in the future, trust funding remains just as important as it did on the day that you first established the trust.

Five Situations Where an Estate Plan Modification Involving Trust Funding is Crucial

The following are five scenarios that illustrate how important trust funding is to the overall estate plan modification process:

  1. When you first created and funded your trust, you may not have been facing an estate tax issue. Now that your plan is updated to include tax planning, the assets that are used to fund the trust may change.
  2. You may now be facing a special needs situation where assets need to be moved into a special trust for the benefit of a loved one that cannot have ownership of the assets outright. You may need to take assets that previously funded your living trust in order to accomplish this goal.
  3. You may have undergone a divorce since first creating your estate plan, and assets that were placed into your trust may no longer be yours. Similarly, you may have new assets that need to be moved into the trust.
  4. Now that your children are no longer minors, it may be more beneficial to move retirement assets out of your trust and instead leave them to your adult kids outright. Your attorney can discuss with you the pros and cons of funding a trust with retirement accounts.
  5. You may have initially funded a trust with an asset that was worth significantly less, or significantly more, than it did at the time the trust was created. Your attorney may advise you to move the asset out of the trust or into a new trust, depending on the circumstances.

When it comes time to update your estate plan, we are here to help. We encourage you to view our client testimonials page today to learn more about how we have helped many other clients maintain and modify their estate plans.