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Sunday, July 31, 2022

The Importance of Funding a Trust Now

Many Floridians who engage in estate planning use trusts for various reasons. Trusts can limit tax exposure, take certain property out of the probate process, or be used for Medicaid planning. Working with a Florida estate planning attorney to prepare a trust is a good first step. However, after all the paperwork is done, properly funding the trust is an equally important step.

What Does it Mean to Fund a Trust?

Funding a trust refers to transferring or directing assets to a trust, once created. This usually involves changing the title from an individual or multiple parties to the trust. If this is not possible or advisable, assets can be “directed” towards the trust.

Bank accounts, stock accounts, certificates of deposit, and other accounts may be simply re-titled. This can often be accomplished by speaking with the financial institution and presenting a copy of the trust document. In the case of real estate, the preparation of a new deed transferring the property to the trust, followed by recording the deed and paying any transfer taxes is required.

Assets that are subject to special tax treatment or a qualifying event generally should not be re-titled but rather guided towards the trust upon the occurrence of certain events. This includes things such as life insurance policies, IRAs, 401ks, other retirement accounts, and 529 accounts.

Under some circumstances, whole life insurance may be re-titled to a trust. There are exceptions, so any transfers or changes should only be done with the assistance of experienced legal counsel.

What Happens if You Don’t Fund Your trust?

An unfunded trust is essentially just a piece of paper and can lead to a potentially expensive and lengthy probate administration. It could even lead to unnecessary litigation. If a trust has no assets or some assets are never transferred to it, your loved ones may have to go to court to receive an order directing what happens to this property. This is what is known as Florida probate administration. The end result may be something you do not desire such as selling assets or re-titling them in a way you would not want.

If you have gone through the effort of creating a trust, you probably wish to fully realize the benefits of this estate planning option. Seeing this process through means making sure a trust is funded. This should be done carefully and with the guidance of legal counsel. The Florida Trust Code is complex and varied. No one estate plan is exactly alike and every trust and its requirements should be reviewed on a case by case basis.

For more information about how our Florida Estate Planning Attorney can assist you with your trust, contact us today to schedule a free consultation.


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The Law Office of Jeffrey A. Herzog, P.A. assists clients in Florida, including North Pinellas County, Palm Harbor, Trinity, West Pasco County, and the surrounding areas.



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