Trust Funding Made Simple (Episode 317)

0:31 Well, good afternoon, Michiganders. It is Tuesday, April twenty second, twenty twenty five, and of course this is Tuesday with Tom, Michigan's only Internet show where we do answer your questions about estate planning and a state settlement in Michigan. As always, I'm your host, Tom Doyle, estate planning attorney, lifelong Michigan resident, an ambassador for all things good in this great state of Michigan. Welcome, Welcome, Welcome to today's program. Last week's episode how Much I Guess Not last week it was a couple of weeks ago, but last episode how much should be in your emergency fund. If you don't know what emergency fund is, I encourage you to listen to the program. If you're thinking about getting one, it might incentivize you to get that done. If you have one and you're wondering how much should be in it, I encourage you to listen to the last episode where I talk about all of those matters. Today's topic trust funding made simple. Today we're going to dive into something that's often overlooked but is absolutely critical. If you set up a trust, Congratulations started the process, but your job isn't

2:02 done until you have funded your trust. So today let's talk about what trust funding is and why it matters, and how to. Do it right. But remember. What I'm about to discuss during the program is for educational purposes only. It is not intended to be legal advice. You need to work with your attorney to determine what is appropriate for you and your estate plan. Trust funding made simple. So what is trust funding? Well, I tell clients and Amanda tales clients, think of a trust as well, you've built a box that's sitting on the table in front of you, or another analogy could be. Think of a trust as like a safe. You've had a safe, you've built it, but it only works if you put your valuables inside. So the box only works if you will if you put your valuables in it, or if you have a safe and you've put your valuables in it.

3:16 So essentially, funding your trust is the process of transferring ownership of your assets into the trust's name. Why because if you build that box or you create that safe and you don't put anything in it, it is not controlling or managing anything. Use this example. Let's say you have a trust and one of the reasons you've got a trust is to manage in a state for children or grandchildren, let's say till they get through college. But you don't put assets inside the trust. You just don't do it. Well, you have an empty box. What does that mean? That means the box, the trust, the safe is not going to control what happens with your assets. It's not going to manage those assets until your grandchild child is twenty five.

4:05 So the only way. That the trust can manage your assets is to put assets inside it. That is what's called trust. I'm sorry funding your trust. So question what goes into your trust? Well, it's pretty straightforward. It doesn't have to necessarily always be that complicated. The most common assets are going to be things like bank accounts, real estate, investment accounts, business interest, and life insurance. Those are going to be the most common accounts that you're going to be dealing with. So with your bank account, you're going to look at your bank account. You're going to say, hey, I want to put my bank account into my trust.

4:55 I want to put in the box. I want to put in the safe for my real estate, I want to put that in inside this trust that I've created. So it's as identifying all of these different assets that you have as part of that funding. Now, not everything, though, is going to go into your trust. Will often tell clients, particularly married clients, not to put their motor vehicles inside their trust, and that has to do with a unique protection that they have for the real estate as married couples. Another example are retirement accounts, things like I rais and for one case, normally, well, you certainly don't want to retitle those accounts in the name of your trust because if you did that, you're basically cashing the account in and you're going to pay all the taxes due. The question with your retirement accounts is going to be should your trust be named as the beneficiary on those accounts. The answer to that question is going to occur when you It's going to be obtained when you have that conversation with your tax advisor and the custodian of the account, because there are tax considerations that can come into play when you put those sorts of assets inside the trust. That's why you need to have appropriate tax advice and advice from the custodian.

6:24 Of that account. Now, let's ask this question, what happens if you don't fund it. Let's just say you build the box, you don't put anything in it, or do you build the safe you don't put anything in. Well, think about that, you've probably spent a fair amount of money to having the trust created. You've basically wasted your money because the trust isn't doing anything for you. The trust isn't doing anything till it has assets to control. And if one of the reasons that you created the trust was to avoid probate, which is one of the most common reasons that people will have for creating a trust, the assets that you haven't put into the trust might now have to go through probate. So you create this trust to avoid probate, you don't put your assets in it, and then your assets go through probate, which defeats your whole purpose, or at least perhaps a primary purpose of your having the trust. Now, most of the time attorneys are going to as part of your trust package, and it certainly is this way in our office going to include a will.

7:35 It's what lawyers generally call a poor over will. It doesn't say poor overt on it. But the idea is that if you have assets that you didn't fund, they will then go into the trust after your death. But and this is a big but, they have to go through probate first. So the prore overwill, he essentially says, any assets that you didn't put in your trust that now go through probate. When probate is finished, now they go into your trust. So again, if a goal of yours was to avoid probate, relying upon your poor overwill to transfer assets is basically requiring probate to occur. The whole point, the whole point of having a poor overwill is just in case, just in case you forget to put something in the trust, or maybe you acquire a new asset down the road and forgot to put it in, or you didn't get around for some reason to putting assets in the trust. So it's there. I liken the poor overwill to.

8:45 The backstop behind the catcher. Hopefully every pitch that has thrown the catcher catches, but if the catcher misses one, the back stop keeps it from going into the stands. Next question, then, so how do you fund it? How do you go about this process of funding your trust? Well, it normally isn't that difficult, but it does take attention to detail you're going to have to start by creating a list of what you own. If you're working with our office and we're preparing a traditional estate plan, will normally give you a trust funding tracker for that, but it's to get information. Put it in writing. Where are your bank accounts, where are your investment accounts? Do you have stock that's not inside an investment account, maybe owns consumer power stock and it's not inside your trust? Real estate? Gather up the deeds to the real estate. That also includes information on timeshares, that you have business interest, Do you have a corporation, do you have a limited liability company, et cetera.

9:55 Gather up all of that sort of information. And of course don't forget about life insurance because life insurance much of the time is going to be something that you're going to fund into your trust. So once you gather all of that information, it's then going through the process of transferring those assets into your trust. Let's use an example of a bank account, since pretty much everybody has a bank account. How do you normally fund a bank account into your trust? Well, normally today in the state of Michigan, what you're going to do is you're going to go to your bank or your credit and you're going to say, look, I created a trust.

10:43 I need to fill out the paperwork that you have. They will have that paperwork so that when I die, what's left in my bank account goes into my trust, essentially making the trust a beneficiary on your account. Now some places are going to call it a beneficiary. Some are going to call it a TOD, which means transfer on death. Some will be calling it. A POD, which means payable on death. Essentially, they all mean the same thing. But it's making sure that the paperwork is completed at your bank or credit union so that upon your death, the account will now be owned by your trust.

11:25 You don't what does that mean. That means you don't have to transfer it to the to the trust. Now, you don't have to transfer the bank account to make it owned by your trust. Now. It used to be that's what we had to do. So we'll have clients with older trust where they actually had to make their bank accounts retitled in the name of the trust. But laws of change in the state of Michigan which makes it much easier, and most of the time we're simply going to make the. Trust the beneficiary on the account. Real estate going to have to have deeds prepared for real life state. If you've got investment accounts, most of the time you can have those payable upon your death to the trust.

12:09 Now, if you have individual. Shares of stocks such as Consumer's Power as my example, it's going to be required that you're going to have to have that stock transferred into the trust. But there's a process going through and identifying the assets that you have, making sure that you track. When that's done, you send you get paperwork from your bank showing that it's been done. Put that paperwork with your trust. You have banker work from your investment company showing that the account that you have there is now payable to your trust. Excuse me, make sure that you keep all that paperwork and track. What you are doing. A question that is.

12:53 Frequently asked though, is can I still use and control my assets after I my trust? Well, the answer to that is going to depend upon what sort of trust you have. Is it a traditional revocable living trust or is it an irrevocable trust. Important Now, most of the time, the traditional trust that's part of a traditional estate plan is a revocable living trust. If you're not sure what that means. I invite you to listen to other episodes of this program where I explain the difference. But if it's revocable, yes, you still retain full control. You can use your assets, you can spend your money, you can sell your house. You can give assets away just as you did before. So you are not losing control of those assets by funding them into your trust. Important consideration.

13:59 You have your trust created, you fund your trust, make sure that it is kept up to date. Life changes, right. You might buy a new house, you might open a new bank account, you might inherit something from a relative. All of those assets are now new assets that you didn't own at the time your trust was created. You need to make sure that you have at least an annual review of assets to double check to make sure that they have appropriately been funded. Or just tell yourself a major asset like buying a new house that's a big one. Don't wait for a year to decide to have a deed done. Have that done at the time you are buying the house, but on at least an annual basis good idea. Check your state planning documents, and that's going to include check you your funding to make sure that it is all up to date. Remember, at the end, your estate plan or your trust if you have one, is only as strong as your trust funding.

15:17 If you're unsure whether your trust is properly funded or you haven't touched it in years, reach out to the attorney that prepared it for you and have a review, or you can always contact our office. I'll talk a little bit later shortly in the program about how you can go about doing that. Well, thanks for listening to this episode of about funding your trust, and until the next time that we get together, I hope you have the opportunity to review your trust and review your funding to make sure that is everything is appropriately in place for you. Of course, Amanda and I would be honored to have the opportunity to help you if you have questions about funding or putting together your estate plan, perhaps amending a plan that you already have, or assisting you in settling a loved one's estate. You can have an

16:48 in person consultation at our Grand Rapids headquarters or at our Lancing location. We have virtual consultations via Zoom or telephone, so we can likely assist you wherever you happen to be in the state of Michigan, and we have our legal store where you can order individual documents. Let's say all you need is a new certificate of trust because you've got property that you need to sell as a trustee of a trust. All of those things, scheduling in personal consultation, scheduling virtual consultations, or ordering individual documents can all be found at our website, Doyle LAWPC dot com.

17:32 So I invite you to go there, schedule your consultation, order your individual documents, and now I think that is going to be it for today's show. Though, as always, if you have a comment about the program, a topic that you'd like to have me discuss, their questions that you'd like to have answered, head on over to Tuesday with Tom dot com. Leave a voice message by clicking on the microphone. You can simply click on it, leave a voice message for me, or send me an email.

18:14 That would be Tom at Tuesday with Tom dot com. And please follow us on Facebook. Invite your friends and families to follow us to that would be Tuesday with Tom. Follow the office as well at Doyle LAWPC, and don't forget to join our mail email list. We have a monthly e newsletter that goes out with information about estate planning and other topics that. We think might be of interest to you. You can subscribe to that newsletter at Tuesday with Tom dot com or at DOYLELAWPC dot com. Remember Tuesdays, remember too if you will that Tuesday with Tom is available on Apple, po Podcast, Spotify, Amazon Music, Google Podcast, iHeartRadio, Speaker, many many other distribution channels. And if you have a favorite place that you listen to your podcast and you're not finding Tuesday with Tom there, reach out to me and we'll see if we can't add that to our list of distribution channels. And of course you can always ask your smart speaker to play Tuesday with Tom. Well, thanks again for spending some of your time with us to do today, and as always, I hope that you have an awesome day and an awesome week in Michigan.

19:44 Stay safe. Tuesday with Tom has been brought to you by the estate planning attorneys at Doyle Law PC. To learn how we can help you with your estate plan or with settling a loved one's estate, please call it today at five one seven three two three seven three six six. That's five one seven three two three seven three six six