I often compare living trusts to a moving van. The comparison is novel, perhaps, but surprisingly appropriate. A trust and a van are somewhat similar in functions because they both are vehicles that are capable of moving your assets. A van can move a household from one place to the next. A trust, through its trustee, can move assets from one's estate to many destinations including to a spouse, children, relatives or others. Every move must have a destination, a time, and a set of directions. A living trust can be your moving instructions as to when, to whom, and in what amounts your estate is to be delivered. Your trust's moving instructions may also include provisions for delaying distributions to children, planning for disability, directing asset management, providing charitable bequests and other planning.
A living trust may represent one of the easiest and most efficient ways of moving your estate. The advantage of a living trust over a Will is that a living trust has the potential to avoid the delays, expenses, and administration of probate. As far as moving instructions are concerned, this is like directing your moving van to drive by the court house and the attorney's office without stopping in for extended consultation or administration. For larger estate, a living trust also has the capability of helping minimize the toll of estate tax. Here your trust's moving instructions can efficiently provide that your estate is to avoid the route that includes the estate tax toll booth.
Much like a moving van's effectiveness requires cargo, a living trust's effectiveness requires funding. For a living trust to be funded, assets must be properly placed into the trust name. Once funded, the trust is able to hold control, and/or distribute its named assets. Without funding, the trust vehicle will be empty, and your trustee will be powerless to execute the trust's directions. Without having your assets placed into the trust, you may lose the tax and probate avoidance advantages that the trust provides. Your trust may represent a beautifully efficient method for avoiding probate, for avoiding estate taxes, and for distributing your property. Yet without funding, the beautiful plan will be as effective as an empty moving van.
One way to tell if your trust is funded, is to review how your bank accounts, financial accounts and real property are titled. If any of these assets have a statement, deed or title that does not make reference to a "trust" or a "trustee", there is a substantial chance that the asset may not
be in trust. Funding is critical to an effective trust. If you have even the slightest doubt whether your property is held in or controlled by your trust, you should seek the aid of an attorney to review the proper funding of your trust. An effectively funded trust will maximize your trust's ability to avoid probate, minimize estate taxes and effect distribution of your assets.
About the author: Paul Schmidt is an attorney who concentrates in the areas of Trusts, Estate Planning and Litigation. He has been asked to speak before attroneys, profesionals and community groups. He is a member of the Florida and American Bar Associations (Probate and Property Sections) and the National Academy of Elder Law Attorneys. His office is located at 33920 U.S. 19 North in Palm Harbor, 784-6600.