Alexandria, VA Estate Planning Blog

Monday, July 12, 2010

What Happens If I Don't Fund My Living Trust?

What happens if I don’t fund my living trust?

Answer: Your plan will likely be totally disrupted and your estate and your beneficiaries will be exposed

You have to fund a living trust. Having a trust, in itself, is generally insufficient and ineffective. You actually have to fund each asset you want the trust to govern.

An unfunded living trust is as useful as a DeLorean Time Machine without a Flux Compacitor. Or, for those of you who haven’t seen any movies within the Back To The Future Trilogy, as useful as a bank account with a balance of zero.

A living trust’s terms only govern assets that have been funded into the trust. Funding is the process of titling assets in the name of the trust. The type of funding method depends on the type of asset and other factors. Typical funding methods can include beneficiary designations (e.g., life insurance), assignments (e.g., tangible personal property), and deeds (e.g., real estate).

If you die with an unfunded trust, consider the following:
a. The living trust is likely utterly ineffective and useless
b. If you have a will, your will would likely control (but only to the extent its terms govern your entire probate estate)
c. If you don’t have a will, or it was lost, stolen, destroyed, or successfully contested, then intestacy controls
d. Your whole plan will be disrupted
e. You wasted your money on the trust
f. Your estate and your beneficiaries will be at risk and potentially subject to disastrous consequences (See Blog What Happens If I Die Without A Will (or Valid Will); Blog Categorie Do I need An Estate Planning Attorney?) 

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