One of the main reasons people create a Trust is so their heirs can avoid the probate court process. Many people don’t realize a Trust only avoids the probate process if it is properly funded.
What does funding your trust mean? Funding your trust requires your assets to be held in the name of your Trust. When you die, if assets were held in your name only, your heirs will need to go through the probate process before they can have access to those assets.
How to I fund my Trust? There are several ways to fund a Trust. It can be accomplished by designating your Trust as a beneficiary on specific accounts such as savings, checking or retirement accounts. You can also designate your Trust as the beneficiary of your life insurance policy.
Partnerships and Limited Liability interests can be transferred to your Trust by using a general assignment. However, you should always refer to your entity formation documents and agreements to ensure the assignment is allowed.
Putting your home in the name of your Trust is one of the more common ways to fund it. This requires executing a deed conveying your property to yourself as trustee of your Trust. This avenue is not limited to your personal residence and can be used for other real estate you may own. Transfers of real estate can become very complicated and require more than just a properly executed deed. For more information see https://www.michigan.gov/taxes/property/forms/instructions/property-transfer. Every situation is different so it is important to seek advice from a tax professional before a transfer occurs.
As a word of caution, titling your assets in the name of your Trust can impact insurance policies on those assets. You must contact your insurance provider before re-titling any insured assets, to make certain you are properly covered.
Regardless of how you choose to fund your Trust, you must ensure the names and dates are accurate. Discrepancies could lead to disputes or institutions refusing to work with your Trustee without court involvement.
Funding your Trust properly is very important. As stated previously, assets left if your individual name would need to go through the probate process before your heirs will be able to access them.
The probate process is not as bad as it is made out to be. If minimal assets require court involvement, your estate may qualify for a simplified probate process. For more information on probating a small estate see How to Probate a Small Estate in Michigan.
If you are considering a Trust or need other estate planning contact Attorney Victoria Benavidez to discuss your options. 269-381-4471.
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