What is funding? If you completed your trust or will and you do not know what “funding” is, then odds are your plan will not work as intended (or even at all) when life changing events occur. So what is funding? Funding is the process of changing the ownership and beneficiary designations on your assets to ensure they align with your will or trust. Your will or trust does not work if it is not properly funded. So how do you properly fund your trust? You do your funding homework. Your attorney should give you specific instructions on how each of your assets should be owned and the beneficiary listed. There is no cheat sheet and every plan requires specific funding instructions. For example, a family with minor children may be advised to put their trust as the beneficiary of their IRA; however, another family with minor children may be advised to list a spouse and not their trust. Why?
There are several factors your attorney considers and weighs when recommending how your assets should be owned and the beneficiaries listed to ensure your planning goals are fulfilled in the most tax-efficient and protective manner as possible.
FUNDING FACTORS:
- Goals
- Asset values
- Asset type (IRAs, cash, real estate…)
- Marital status
- Children?
- Your ability to manage assets, your spouses, & your children’s
- Charitable goals
- Potential Tax liabilities
- Assets you want sold
- Assets you do not want sold
- Business assets?
- Personal property designations
- Net Worth
- Type of plan put into place
- Age of beneficiaries
- Special needs of spouse or beneficiaries
- Divorce concerns, for you, for your beneficiaries
- Prenuptial agreements in existence for you, for your beneficiaries
- Creditor issues, for you, for your beneficiaries
- Asset protection goals
- Nursing home protection
- …
If you did not fund your plan or did not receive advice on how to properly fund your plan, come see us today. Your estate plan is only as good as your funding. To learn more about the ramifications of improper funding see our post on Dave’s Funding Lesson: Why Funding Matters.
