Clients who prepare a comprehensive estate plan with a trust, will, power of attorney and medical directive have won the battle but not the war. In many cases after the plan is complete we continue to see trust funding issues. Clients or professionals cause trust funding issues when a portion of the plan is not followed to completion.
Funding issues are caused in a number of ways. Some issues come about when the trust is initially prepared. A small number of attorneys prepare trusts for clients without any instructions for how it should be funded. This mistake is inexcusable. Often this results in assets that remain in the individual’s name contrary to what was planned. During the planning process all assets should be inventoried. An ownership plan must be developed for each category of asset. Finally, the attorney drafting the plan should provide instructions of how to finalize the plan.
Another funding issue results from the failure to properly title newly acquired property. Sometimes when a new home, or other property, is purchased the parties involved may not even be aware of the trust’s existence. If the deed for the new home is prepared by the title company or seller’s attorney they have to be provided the trust information to make sure the property is properly titled. If this step is missed the newly acquired property will be outside the trust.
Similarly, problems arise when there are changes to investment accounts. For example, there could be a change in brokerage firms that might have custody of certain investments. A rollover of a retirement account into an investment account or IRA must be properly handled. Or a client might simply open a new bank account without taking the estate plan into consideration. All of these examples can result in assets being left out of the trust.
Trusts are an important part of a comprehensive estate plan. Unfortunately, the goals of the trust can be hampered by the failure to properly fund, review and manage the trust after signing. If someone is investing the time and effort to complete an estate plan it is important that all of the steps necessary for putting that plan into place are followed. It is also important that those plans be reviewed at least annually to make sure that they are being properly managed and funded in an ongoing manner.
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The attorneys at Penzien & McBride, PLLC assist families throughout the State of Michigan with their estate planning needs. If you are looking for a compassionate professional that can help you through the estate planning process or if you would like additional information about our estate planning services give us a call at (586) 690-4400 or complete our contact us form.