Is Your Plan Complete? Getting The Job Done

Recently, I had a family (the mother and her children) come to me. The husband had died unexpectedly. Their estate plan was centered around a revocable trust. The trust had been drafted by one attorney; then another attorney amended it.

The husband had been involved in several businesses. He and his wife owned some properties, several oil interests, personal property, equipment, and a home. I discovered that only some of the property was in the trust. Some of it was not, particularly the business properties. The trust had not been fully “funded.”

Funding, in lawyer’s terms, is the process of being sure that property passes the way that you want it to pass, in the event of your incapacity or death. Funding a trust means setting up titles or transfers to property so that it will pass according to the instructions in the trust.

If the trust had been fully funded in the case described above, I would have opened a file to help the family with the trust administration. Because of the failure to properly fund the trust, we ended up opening nine files (to date), including a probate (one of the main reasons people set up trust is to avoid probate).

We also discovered some of the “funding” was done incorrectly. As an example, some accounts were set up to pay on death to just one individual, rather than to the trust. The thought was the individual would “do what is right”. The family did not understand that could cause tax as well as family issues later on.

Funding is a lot of work. It may get frustrating for the clients and even our team of funding experts. Many times, it is the most time-consuming part of the estate planning process.

I shake my head at people who rely on online planning or even quickie, run of the mill estate plans. I know that the funding is not being done correctly. (That is not even getting to the question of whether the plan reflects what the client really wants or needs.)

“Funding” occurs whether you have a trust or not. As an example, if you have a will, but an account is set up as payable to one of your children, upon your death it goes to that child. It does not matter what your will or trust says—that account is going to go to that named beneficiary.

The point is that in any estate plan, you must, must, be sure that the property is truly going to pass pursuant to your plan and wishes. Whether you have a trust, a will, or nothing, be sure your property is going to pass the way that you want it.

As I have often said, you can make a decision, or the government will. I promise you in the latter case it is going to be much more expensive, much more frustrating, and may end up with the result that you do not want.

In the end, it is worth the time and money it takes to properly fund your plan. I encourage you to work with a lawyer you trust.