Importance of Funding
If there is one problem with a trust, it is the funding problem.
Here is one example of what happens when a trust is not funded. The trust named a person to get real property. Unfortunately, when the trust creator died, the real property was titled in the name of a corporation. Consequently, the property did not go the the person named in the trust, and instead the person entitled to get the stock also got the property as an asset of the corporation.
Funding isn't difficult. But here, the creator's failure to fund the trust failed his desire to pass the property. If funding is not dificult, why does it fail. There are two main reasons that trust funding fails.
I see the following reasons for a trust funding failure:
- Innocent ignorance by the trust creator; and
- Failure of the trust creator to maintain title of asset correctly.
Ultimately, I believe that the greatest cause is innocent ignorance on the part of the trust creator. When you buy a "trust document" from a store, an online service, or a document preparer (who might be an attorney) you are not getting the advice and education that comes from a competent and trusted personal family advisor.
Everyone has some unique family, financial, or personal differences. Accordingly, one size does not fit all. Being penny wise and pound foolish can be a very big mistake in estate planning.
So, if you obtain a trust--educate yourself. If you pay an attorney, make sure that attorney is committed to ensuring your trust is fully funded and the plan will work. Ask how many times they will meet with you. Ask if they prepare a funding toolkit. Ask what they do to ensure your plan will work.
Ask lots of questions about their estate planning process, what do they do for you, how does it work, why do they do what they do. An attorney seeking to be a trusted personal family advisor will be able to explain what they do that makes them different than other attorneys.
If you have a trust make sure it doesn't fail. Educate yourself and stay on top of funding.
