Home About Us Practices Contact Us News Doug TV Questions Tools/Forms

Funding Your Revocable Trust (or “Why does my financial advisor tell me I have to re-title my assets?)

The Conversation About Funding Your Trust. It is a very common scenario. A client visits their lawyer and establishes a Revocable Trust for their estate plan. The objective is to avoid probate for their estate upon death and save their family from the costs, delays and frustrations of a court supervised estate administration.

Sometime later they meet with their financial advisor and the conversation turns to estate planning and avoiding probate. The client tells the financial advisor that they set up a Revocable Trust with their attorney. The financial advisor explains that the Revocable Trust will not avoid probate unless the trust is funded, meaning that assets are owned by the trust. The financial advisor recommends that ownership of investment accounts with the advisor be changed and that the client change ownership on their house, bank accounts and other assets.

Now the client is uncertain, confused and worried. Their financial advisor is reliable and an expert on these things. However, their lawyer is also reliable and knows their business. Is something wrong? How did the client get two different stories about this “funding” business.

This article will try to explain why clients find themselves asking questions about funding their Revocable Trust. It will also try to outline what someone should do when faced with the choice to fund or not to fund.

The First Rule Of Funding A Revocable Trust. One basic principle about Revocable Trusts is that any single person who uses a Revocable Trust must absolutely fund the trust immediately. There is no confusion about this. There are no mixed messages. Any widow, widower, bachelor or single woman who uses a Revocable Trust for their estate planning must transfer their assets into the trust. Failure to do this will risk an unwanted probate at death and foil the estate plan.

This article is targeted only at married couples using a Revocable Trust. The remainder of this article will not help a single person understand their Revocable Trust or tell them anything about how to properly fund their trust. If you are a single person using a Revocable Trust for your estate planning, STOP READING THIS ARTICLE, CLICK ON THIS LINK AND READ ONLY ABOUT HOW TO FUND YOUR TRUST.

Second Rule Of Funding Revocable Trusts. A married couple living in Wisconsin and owning Wisconsin assets has special options when it comes to funding a Revocable Trust. This article talks about those special Wisconsin-specific options. If you are not a Wisconsin resident with assets located in Wisconsin, then this article will not apply to you. You must consult with your attorney and financial advisor for advice on funding your Revocable Trust.

Also, if you are a Wisconsin resident but you own property or have assets located outside of Wisconsin, then this article will not apply to those non-Wisconsin assets. Those assets will require special attention and you need to consult with your attorney or financial advisor for advice on how to handle those special assets.

The Wisconsin Advantage For Married Couples. Married couples living in Wisconsin have a special option for funding their Revocable Trust with Wisconsin assets. Wisconsin law permits a married couple to sign a Marital Property Agreement. This is a contract between the husband and wife where they agree that assets will automatically transfer to the trust (i.e. fund the trust) when either spouse passes away.

With a Marital Property Agreement, a married couple has the best of both worlds. They do not need to do the leg work and paperwork necessary to fund their Revocable Trust immediately after setting the trust up with their lawyer. At the same time they are secure in the knowledge that their estate will avoid probate. Delaying the physical work of funding the trust in this way has many advantages:

Less paperwork and legwork leaves more time to do things they actually enjoy.

Many assets (for example, cars and homes) tend to be bought and sold from time to time. An automatic funding mechanism avoids the need to do the work over again each time.

If a couple has many different bank accounts, investment accounts, C.D.’s and other assets, the automatic funding mechanism avoids the chance that one or two accounts or assets get missed. Everything gets covered by a single document - the Marital Property Agreement.

Some people like the way their accounts are set up. They have some accounts in the husband’s name, some in the wife’s name and some owned jointly. Delaying the re-titling until one spouse dies allows them to keep their special arrangement.

Re-titling real estate often means that the deed will be reported in the local newspaper, thus giving neighbors and perfect strangers information about your estate planning that the couple would prefer to keep private.

Return to Estate Planning FAQ

Copyright © 2009-2019 Fitzgerald Law Office. All rights reserved.