Q: What do I need to do after my estate plan is signed?

A: As soon as your estate plan documents are signed you should contact all financial entities to make sure your accounts are titled in a way that works with your documents. This is called “funding” the plan. Funding is one of the most important aspects of estate planning.  While it is not difficult, it can be time-consuming and frustrating because each financial entity has its own rules and forms. This sometimes leads our clients to put off the funding of their plan or assume that it is not really necessary.

It is very important to properly fund your plan! Your legal documents (such as a Will or a Living Trust) are only one component of your entire estate plan. Jointly titled property, relationship agreements, and designated beneficiary instructions all supersede your Will or Living Trust. So if any of those contradict your legal documents, or worse, depend on them, what you have is a recipe for conflict and costly court intervention.

There are three key components to funding:

  1. Determine what you own and how you want it to be handled;
  2. Ensure all your assets are properly titled; and
  3. Ensure all your assets have designated beneficiaries or Payable Upon Death instructions that work with your legal documents.

Related Questions

What happens if I don’t fund my plan?

A: If you have a trust, we provide you with a pour over Will to catch anything that isn’t funded to your Trust, and assign it to your Trust after your death. However, this will not avoid probate. Since avoiding probate is one of the main reasons many people choose to set up a revocable living trust, relying on the Pour Over Will somewhat defeats the purpose. More importantly, anything that exists outside the Trust isn’t protected by the Trust’s provisions on incapacity. If you suffer an accident that leaves you incapacitated, but still alive, you may have to go through the court process of being assigned a conservatorship or guardianship. Your Fiduciary Agent will need court approval to manage assets outside your Trust. But everything inside the Trust can be easily, and privately, managed by your Incapacity Trustee. So it’s certainly in your best interest to fund as much as possible into your Trust.

If you have a Will, failing to properly fund your plan will mean that the financial entities will follow the instructions you have given them and will distribute each asset according to its title or designated beneficiary. This means that if you have a life insurance policy going to your brother in your Will, but the designated beneficiary on your life insurance policy is listed as your ex-spouse, then it’s your ex-spouse who gets the life insurance, not your brother. In addition, if your estate has no cash in it at the time of your death (because all your accounts are jointly owned or transferred to individuals via designated beneficiary instructions) then none of the specific gifts in your Will can be provided to your beneficiaries.

How soon do I need to complete funding?

A: The answer is: As soon as possible, but certainly before you die or become incapacitated. You should not delay implementing the movement of all assets (including personal property) into your trust’s name. One never knows what will happen as each day passes. So be sure to title or designate future acquisitions into the trust as well.

Our firm sends you a reminder at 3 and 6 months to help you remember to finish the process. It is ideal to have everything funded by the 3 month mark.

How do I fund my Trust?

Step 1: Open a Trust account with the minimum required deposit OR retitle an existing account in the name of your trust.

Step 2: Contact the financial entities that hold your bank accounts, savings accounts, and investment accounts and change the title of your accounts into the Trust name

Step 3: Contact the financial entities that hold your life insurance policies, savings bonds, or other assets that can’t be held by an entity and ensure the Trust name is listed as the primary designated beneficiary

Step 4: Speak with an expert about 401Ks, IRAs, and other retirement accounts. Many times, tax-deferred retirement accounts are a person’s first or second most valuable asset, and so designating the right beneficiary is critical. Because these funds have not been taxed yet, however, there are complicated rules around who can receive these assets and when.

How do I fund my Will?

Step 1: Make a list of all your assets and how they are owned (whether in your own name, jointly, or through an entity). Joint assets will pass to the co-owner first, then to any listed beneficiaries of that person.

Avoiding Probate

Step 2: Determine which assets will be distributed to which beneficiaries, and in what shares.

Step 3: Contact the financial entities that hold your assets and for each account list the appropriate beneficiaries as either Transfer/Payable Upon Death (bank accounts, investments, 529 custodial plans) or Designated Beneficiary (annuities, retirement accounts, life insurance policies.). Remember that these instructions supersede your will, and that there are many circumstances in which direct distribution to beneficiaries can cause more problems than it solves. Proceed with caution, and maybe with the advice of an expert!

Step 4:  Regularly check your accounts to ensure the distribution matches your intentions. Remember that your intentions might change over time.

Utilizing the Probate Process

Step 2: Determine whether the asset will be managed as part of your estate or distributed directly to a beneficiary immediately upon your death

Step 3: For assets that you want to go directly to beneficiaries, contact the financial entities and list the appropriate beneficiaries as either Transfer/Payable Upon Death (bank accounts, investments, 529 custodial plans, etc.) or Designated Beneficiary (annuities, retirement accounts, life insurance policies). Again, remember that these instructions supersede your will, and that there are many circumstances in which direct distribution to beneficiaries can cause more problems than it solves. Proceed with caution, and maybe with the advice of an expert!

Step 4: For assets that you want to be distributed through your Will, list the TOD/POD or designated beneficiary as “My Estate” or leave blank

This seems complicated. Can I hire someone to do this for me?

A: We offer funding guidance on an hourly or flat fee basis depending on your situation and type of plan. Contact us for more information. If you have a financial advisor, this is also one of the services they offer, and we are happy to work with them to ensure proper titling. Finally, there are services that will fund your plan with your assistance. We can refer you to those we trust.

Related content on our blog: 5 Top Questions About Trust Funding Answered