When estate planning, it is important that Maryland residents understand all the necessary steps to ensuring the security of their assets. A prime example is that of trusts. When a trust is established, there are additional steps that must be taken to ensure that it will function in its entirety when needed. According to one recent news report, one task that is often missed is the funding step, which can have detrimental consequences during the probate process.
When a trust is not properly funded, that portion of the estate plan basically becomes a worthless stack of papers rather than the secure set of documents needed to transfer assets. A trust can only determine the transfer of assets that it "owns," which means assets that are named in the trust. Any assets that are in the name of the trustor at the time of incapacitation or death will be handled separately during the probate process.
The trustor, along with legal and financial advisers if needed, is primarily responsible for ensuring that the trust is funded. Property ranging from real estate to small collectibles can be listed in a trust, but it must be transferred to the ownership of the trust. Similarly, financial accounts and insurance policy beneficiary designations must be changed individually and listed in the trust in order for them to be protected. When accounts are not consistent with the trust, the individual designations will trump the trust instructions. Failing to properly fund the trust and ensure that beneficiary designations are consistent can lead to costly issues in the future.
Estate planning is a process, and one that comes with very serious implications. Understanding how the process works is one vital key to ensuring that one's assets are protected and beneficiaries are listed. When establishing a trust, Maryland residents may benefit from examining their individual situation to determine what will suit their needs the best. Working through the estate planning process with the right tools and knowledge can greatly aid in the overall success of the final plan.
Source: Gazettes, "ESTATE PLANNING: Is Your Living Trust Worth More Than The Paper It's Written On?" Curtis Kaiser, Nov. 3, 2012