A revocable living trust — also known as an inter-vivos trust — is a useful estate planning mechanism for many reasons. Living trusts can be used to help assets avoid probate, protecting your family’s privacy while helping them to avoid court fees and oversight. Living trusts also afford you a significant level of control, even after you become incapacitated or pass away.
With that being said, there are several common errors that can prevent your trust from reaching its full efficacy. One of the most common trust errors is to leave the trust as an “empty vessel” by not properly re-titling assets into it when you have the chance. Let’s explore some of the important considerations for funding a living trust to know during Michigan estate planning:
What Is a Living Trust? A Brief Overview
A trust is a written agreement created by the settlor or grantor, which names an individual who is responsible for managing trust property, as directed by the trust agreement. This person is known as the trustee. A revocable living trust allows the settlor to maintain control of their assets during their lifetime, and modify or revoke the trust at any time.
The revocable living trust is one of the most popular types of trusts in the United States, because it offers many benefits appealing to a range of individual circumstances.
For instance, placing assets into a living trust can allow them to pass to your beneficiaries without having to go through the oversight of the probate courts. This can save time, money, and stress for your loved ones during the estate administration process, and can help protect your family’s privacy. Crucially, establishing a trust can also offer you a great deal of control over your assets, both while you are living and after you have passed. A trust can be a straightforward way to set aside assets in order to care for a minor, or a dependent with special needs. Trusts can also enable you to set down rules, requirements, and restrictions for your beneficiaries, controlling conditions for if, how, and when they may receive their inheritance.
The creation of a trust can also help protect your estate from certain taxes and fees, which might ultimately allow you to provide more for your beneficiaries.
There are many important considerations to be addressed in the creation of a trust, so that it is designed to your specifications and in line with all necessary legal formalities. One of the practicalities involved in creating a trust, for example, is appointing the trustee, along with one or more successor trustees, who will take on the responsibilities of managing the trust if the primary trustee is unable to do so. Typically, the settlor will act as the trustee for as long as they are living, with a designated successor trustee stepping in after their death.
Another crucial yet frequently overlooked consideration is taking care to properly fund the trust with the assets that you choose; otherwise, it will remain an empty vessel, and may not provide any of the advantages or opportunities that we discussed above.
Don’t Leave an Empty Vessel: What Goes Into Funding a Trust?
Once the trust is created, it is essential to re-title your selected assets into the trust.
As you consider the ins and outs of properly funding a living trust, there are a few important considerations to discuss with your estate planning attorney — an important partner who can help ensure that your trust is complete, and designed to ensure that your wishes will be executed as you see fit.
One of the most important things to discuss with your estate planning attorney is which of your assets should be used to fund the living trust, and which should not.
Broadly speaking, many important assets can be transferred into a trust, including but not limited to:
- Real estate (including property that is mortgaged)
- Business interests
- Investments and securities
- Valuable personal property (such as artwork, antique furniture, precious metals and jewelry, or private collections)
- Bank accounts and holdings
An attorney can help you assess and understand your unique circumstances, and take appropriate actions based on the specific variables of your situation.
For instance, if you have real estate that should be transferred into a trust, your attorney can help you execute the proper paperwork to ensure that you successfully transfer the property into the name of the trust. An attorney can help you understand which methods to use for your situation, and take steps to ensure that all paperwork is filed properly. An attorney can also offer keen insight into variables you might overlook on your own; for instance, if you own real property in multiple states, an attorney can help you take steps to prepare for the possibility of ancillary probate. An attorney can also offer their experienced perspective on next steps when it comes to taxes, title insurance, mortgages, and other important practicalities that go hand-in-hand with owning or transferring real estate in Michigan.
For property that may not be titled — such as valuable family heirlooms or an antiques collection — an attorney can help you draft documents that properly transfer the assets into your trust. An attorney may also help you consider whether to take advantage of a pour-over will, a mechanism that helps to “pour” all of the estate assets that pass through your will directly into a previously created trust at your death.
An attorney can also help you understand alternative mechanisms for transferring assets such as motor vehicles and financial accounts, such as naming a transfer on death or payable on death beneficiary for bank accounts and mutual funds, or utilizing joint tenancy with rights of survivorship for titled property — both of which can enable assets to be transferred outside of probate.
It is also important to understand the difference between transferring assets into a trust, and naming the trust as a beneficiary. A knowledgeable and savvy estates and probate attorney can help you consider the best course of action for your unique situation, based on your assets, your goals, and any specific individual challenges that you may be facing.
Looking for Assistance with Trust Creation, Administration, or Issues?
Trusts are a popular estate planning tool, but it is often essential to receive guidance from an experienced, skillful, and knowledgeable attorney in order to ensure that they are properly established and maintained.
Similarly, if you are a trustee, personal representative, or otherwise involved in the administration of an estate, last will, or trust, you probably have questions. An experienced probate and trust attorney can provide informed professional advice to guide you through the legal process, explain your legal obligations as a fiduciary, and help you discharge your duties in an efficient and expedient manner to avoid personal liability.
Our probate and trusts attorney Dean E. Patrick has years of valuable experience helping those in the Metro-Detroit area establish, administer, and litigate trust estates. If you have questions on trusts or other estate planning matters, contact Dean E. Patrick at his Southfield, Michigan office at (833) 469-4897 or click here to arrange your free initial consultation.
Mr. Patrick is a licensed Michigan lawyer with a focus in probate law. He has the legal counseling skills, experience, and dedication that your legal matter deserves. Whether you are looking for a probate attorney, an estate planning attorney, or need legal advice when dealing with these emotional issues, you can trust our office to guide you through the process and deliver results.
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