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Is there any kind of trust you do not have to 'fund?'
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Posted by christine (My Page) on Tue, Jan 19, 10 at 18:04
| My gf and I were discussing our wills/trust situations. She has a trust as she has far more sizeable assets than we do. We are in the process of setting things up and our lawyer mentioned the most important part of a trust is funding it, meaning putting the assets in the name of the fund. My gf says she has never done this and she has the 'type of trust you don't need to do that for,' yet she doesn't know the term for the kind of trust she has.
Is there any kind of trust you do not have to fund? If so, what is the name of that kind of trust?
I mostly want to know if I need to urge her to discuss this further with her lawyer because I love her dearly and would hate for her wishes not to be able to be followed if she missed an important thing like this. |
Follow-Up Postings:
RE: Is there any kind of trust you do not have to 'fund?'
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| Hi Christine, Is there any kind of trust you do not have to fund? If so, what is the name of that kind of trust? It depends on what benefits she really WANTS from her trust. NO trusts are required to be funded... and no trust can protect anything that is not within its corpus either. Your gf may have a "pour-over will" which basically says "everything in this will is left to my trust when I die".... the problem with that is that in order for the will to be executed, everything in it has to go through the probate process (which dramatically kills many (most?) benefits sought from using a trust.) Probate will thereby take however long it takes for her in her jurisdiction, at whatever costs are normal for her jurisdiction... and should there be any heir disputes, asset/leverage complications or contractual discrepancies, both time & money bloodletting can become extensive. I mostly want to know if I need to urge her to discuss this further with her lawyer because I love her dearly and would hate for her wishes not to be able to be followed if she missed an important thing like this. You are a good friend indeed... and such encouragement is warranted & advisable! Cheers,
Dave Donhoff
Leverage Planner |
RE: Is there any kind of trust you do not have to 'fund?'
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| Maybe she is the recipient of an inherited trust, as in a 'trust baby'? |
RE: Is there any kind of trust you do not have to 'fund?'
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| Maybe she is the recipient of an inherited trust, as in a 'trust baby'? When I grow up...
this is what I want to be. |
RE: Is there any kind of trust you do not have to 'fund?'
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| Sushi - what would that mean in terms of her heirs (children) and their trust? I believe her father had a trust for her when he passed away. But this was a discussion specific to meeting with our lawyers about our own families and setting up our trusts. How would one affect the other in terms of my question? Or were you just saying maybe I was misunderstanding her talking about her trust? Dave - thanks for the great info! I will definitely ask her about the pour-over. Thank you. |
RE: Is there any kind of trust you do not have to 'fund?'
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| I was thinking that maybe you misunderstood her, or she's not sure what "trust" means to you. Her father could have set up multi-generational trusts that would cover her heirs, too. |
RE: Is there any kind of trust you do not have to 'fund?'
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| We are talking apples to apples as far as I can tell. I think she would have told me if she had the multi-generational trust. |
RE: Is there any kind of trust you do not have to 'fund?'
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| OK, in that case, any accounts or major assets (over $10K, as advised by our attorney) that are in her name only are not protected by a trust, and will go thru expensive probate. You merely send the account holder (bank, brokerage, etc) a copy of the trust paper (usually just the top page), and they will re-title the account as "John and Jane Doe, trustees, The Doe Family Revokable Trust (or whatever it is), Dated (date of trust)." The lawyer who does the trust can also draft the paper to send to your county clerk to change the real estate ownership to the same wording. (Note, I am in California, YMMV by state, for all I know.) |
RE: Is there any kind of trust you do not have to 'fund?'
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| Even if her father set up a multi-generational trust anything she takes out of her part of that trust and now has as her separate property would need to be put in her trust. Let’s say she took money out of her portion of her father’s trust and bought herself a house. If that house is held in her name, not the name of her trust, she has not protected her estate. Usually a trust is closed out after all the obligations are met a final tax return is filed and beneficiaries get there share. Even a bypass trust would gets settled soon after the last trustee passes and the co- trustee, executer, takes over and closes the trust. |
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