Funding a Trust in Michigan

What Does it Mean to Fund a Trust and Why Should I Do It?

A Quick Overview of Trusts

Trusts are essentially estate planning vehicles that allow the trust maker, or “grantor,” to seamlessly transfer control of assets to beneficiaries should the grantor pass away or become otherwise incapacitated. Once a trust is created the grantor can transfer the ownership of their assets from themselves to the trust. The assets within the trust are managed by a “trustee,” who is named by the grantor.

In most instances, the grantor acts as the trustee during his or her lifetime. This allows the grantor to continue to use all the assets within the trust as if that individual were still the owner of the property and funds, which technically now belong to the trust.

There are several different types of trusts, each of which serves different purposes. In some cases, assets are transferred to beneficiaries and the trust is dissolved after the grantor’s death. In other cases, there may be successor trustees who will be granted the status of trustee following the grantor or previous trustee’s passing or incapacitation.

Which type of trust you choose and how you manage it is entirely dependent on your financial situation and wishes. An experienced estate planning attorney, such as those at The Law Offices of David L. Carrier, P.C., can help you understand the difference and advise you on trust strategies.

Funding a Trust and Why It’s Important

The “funding” of a trust is the act of transferring ownership of assets from the grantor to the trust. Funding can also refer to making the trust itself a beneficiary for life insurance or retirement savings accounts such as 401(k)s or IRAs.

One of the most common mistakes made by grantors is a lack of funding or inconsistent funding. Some people wrongly assume that once they establish a trust their assets are automatically covered by the trust, but this is not the case. A trust is essentially just a piece of paper until it’s funded.

All too often, beneficiaries or successor trustees learn that the ownership and titles of certain valuable assets were never transferred to the trust, and are therefore subject to probate. Additionally, assets that aren’t placed in the trust cannot be managed by the trustee or successor trustees in the event the grantor becomes incapacitated. This can be a serious issue if the grantor was relying solely on their trust to ensure proper management of their estate and the desired transfer of assets to beneficiaries.

Common Assets That Should Be Transferred to a Trust

  • Real Estate
  • Titled Property (Often Vehicles)
  • Valuables Such as Jewelry, Collectibles and Heirlooms
  • Bank Accounts
  • Securities and Investments
  • Business Interests
  • Life Insurance Policies
  • Intellectual Property

If you are considering a trust as part of your estate plan we encourage you to call 616-361-8400 to speak with our estate planning attorneys about your options. West Michigan families who already have a trust but want to ensure it is properly funded can also contact us for a thorough review of your trust and options. We advise having your trust and estate plan reviewed by an estate planning attorney at least once every two years and anytime there are significant financial or family changes in your life that would affect funding and beneficiaries.

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