Blog

Proper funding is an essential step in the estate planning process. Funding is designating beneficiaries on your accounts and policies, as well as transferring assets into the name of your trust.  Making sure you have your funding complete means your estate plan will work how you intend it to. 

Naming beneficiaries on your account can help ensure who receives your assets. If you have no listed beneficiary, then the state controls who gains possession of your assets. For some, this would be the people they would choose to inherit anyway – your spouse, children, parents, or siblings, depending on who is living. But if this is not the case, then you need to plan. 

You also want to make sure the decision of beneficiary is current. If who you named is now deceased, then effectively you do not have a beneficiary for the account and the state would decide who inherits. If you had named a spouse and then divorced, you may want to make sure none of your “outlaws” are going to inherit. If you named children and your family has grown since, you may want to make sure everyone is included. Or, if you severed relationships with a child, you may want to make sure they are taken off the beneficiary list. 

If you have a trust, naming it beneficiary or transferring assets into the trust’s name can offer more protections. First, trusts avoid probate so any asset in the name of the trust will pass to your beneficiaries without the time and expense of probate. Also, having all your assets titled in the name of your trust means you would not have to update all your accounts’ named beneficiaries separately. Whoever is named as a beneficiary in the trust inherits, and if you have an update in your life then you just change the one document rather than going through all the different institutions. Finally, properly funding your assets in the name of your trust can protect your beneficiaries as well. If the beneficiaries were to inherit a lump sum, then any of their creditors could attach to the money; inheriting the assets outright could also result in a spendthrift child depleting in mere months what took a lifetime for you to build up. Proper funding puts a few more checks into place. So, as you consider estate planning, or are updating the plan you already have in place, make sure not to skip the funding step. It may seem like a daunting task to go through all your accounts and policies, but making sure they are set up properly now can save your loved ones time, money, and frustration down the road. 

So, if you already have an estate plan in place, when is the last time you reviewed its funding? We are here to help you, just a phone call away (248) 409-0256.