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In the hustle and bustle of our daily lives, it is easy to put off some tasks that, while vitally important, do not require immediate attention. One such task is the funding of a revocable trust. 

A revocable trust is a trust you create during your lifetime. You have the power to amend, alter, or revoke it as your circumstances or wishes change. However, it is not just enough to create this trust. Clients must ensure that their trust documents are up-to-date and correctly funded to avoid the stressful, time-consuming, and costly probate action that might follow otherwise.

So, how can one keep their revocable trust funding up-to-date? Here are several key considerations:

Real Estate Assets

If you have moved to a new home or purchased additional real estate, ensuring that the property title is vested in your trust is imperative. This process involves changing the ownership of the property from your name to the trust. This change allows the property to avoid probate and pass directly to your beneficiaries upon your death.

For rental properties, a more sophisticated strategy may be needed. Creating a Limited Liability Company (LLC) to hold the title might be advisable due to liability concerns. The LLC can then be assigned to the trust as the owner. This arrangement not only protects you from potential liabilities but also ensures that the property avoids probate.

Bank Accounts

Non-business bank accounts should either be held in the trust’s title or have a pay-on-death (POD) designation naming the trust as the beneficiary. Doing this ensures that upon your death, the funds in the account can bypass probate and go directly to the trust. The trust can then distribute the funds according to your predetermined instructions.

Life Insurance

If you own a life insurance policy, you should make sure that there is a primary beneficiary and a contingent beneficiary on file with the life insurance carrier. Typically, your trust should be named as one of these beneficiaries, following the advice of your attorney. This decision depends on the size of the policy, your other assets, and the potential estate tax consequences.

Investment Accounts

Investment accounts should generally be held in the trust’s title. However, a transfer-on-death (TOD) designation to the trust can also be used at most financial institutions. This designation, like the POD designation for bank accounts, allows the account’s assets to bypass probate and go directly to the trust upon your death.

Retirement Accounts

For 401Ks, IRAs, and other qualified retirement accounts, it’s essential to keep beneficiary forms current and up-to-date. Typically, spouses are named as the primary beneficiaries, while others, such as children, the trust, a retirement plan trust, or a charity, are named as contingent beneficiaries. These designations allow these tax-advantaged accounts to pass outside of probate and ensure that the assets are distributed according to your wishes. However, if children are minors, they should not be directly listed on the retirement plan beneficiary form. 

Consulting an Expert

While the task of funding your revocable trust may seem daunting, it is a crucial step in ensuring that your assets are distributed according to your wishes and that your heirs can avoid the complexities of probate.

The guidance of an experienced professional, such as Lawrence Israeloff, can be invaluable when planning and maintaining your trust. Trust funding is an ongoing process that should be periodically revisited and adjusted to reflect life changes, so don’t hesitate to seek professional advice to ensure that your revocable trust funding remains up-to-date.