Episode Transcript
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Speaker 1 (00:31):
Well, good afternoon, Michiganders. It is Tuesday, April twenty second,
twenty twenty five, and of course this is Tuesday with Tom,
Michigan's only Internet show where we do answer your questions
about estate planning and a state settlement in Michigan. As always,
I'm your host, Tom Doyle, estate planning attorney, lifelong Michigan resident,
(00:55):
an ambassador for all things good in this great state
of Michigan. Welcome, Welcome, Welcome to today's program. Last week's
episode how Much I Guess Not last week it was
a couple of weeks ago, but last episode how much
(01:17):
should be in your emergency fund. If you don't know
what emergency fund is, I encourage you to listen to
the program. If you're thinking about getting one, it might
incentivize you to get that done. If you have one
and you're wondering how much should be in it, I
encourage you to listen to the last episode where I
(01:40):
talk about all of those matters. Today's topic trust funding
made simple. Today we're going to dive into something that's
often overlooked but is absolutely critical. If you set up
a trust, Congratulations started the process, but your job isn't
(02:02):
done until you have funded your trust. So today let's
talk about what trust funding is and why it matters,
and how to.
Speaker 2 (02:15):
Do it right. But remember.
Speaker 1 (02:18):
What I'm about to discuss during the program is for
educational purposes only. It is not intended to be legal advice.
You need to work with your attorney to determine what
is appropriate for you and your estate plan. Trust funding
(02:45):
made simple. So what is trust funding? Well, I tell
clients and Amanda tales clients, think of a trust as well,
you've built a box that's sitting on the table in
front of you, or another analogy could be. Think of
a trust as like a safe. You've had a safe,
you've built it, but it only works if you put
(03:07):
your valuables inside. So the box only works if you
will if you put your valuables in it, or if
you have a safe and you've put your valuables in it.
So essentially, funding your trust is the process of transferring
ownership of your assets into the trust's name. Why because
(03:28):
if you build that box or you create that safe
and you don't put anything in it, it is not
controlling or managing anything.
Speaker 2 (03:37):
Use this example.
Speaker 1 (03:38):
Let's say you have a trust and one of the
reasons you've got a trust is to manage in a
state for children or grandchildren, let's say till they get
through college. But you don't put assets inside the trust.
You just don't do it. Well, you have an empty box.
What does that mean? That means the box, the trust,
the safe is not going to control what happens with
(03:59):
your assets. It's not going to manage those assets until
your grandchild child is twenty five.
Speaker 2 (04:05):
So the only way.
Speaker 1 (04:07):
That the trust can manage your assets is to put
assets inside it. That is what's called trust. I'm sorry
funding your trust. So question what goes into your trust? Well,
it's pretty straightforward. It doesn't have to necessarily always be
(04:28):
that complicated. The most common assets are going to be
things like bank accounts, real estate, investment accounts, business interest,
and life insurance. Those are going to be the most
common accounts that you're going to be dealing with. So
with your bank account, you're going to look at your
(04:49):
bank account. You're going to say, hey, I want to
put my bank account into my trust.
Speaker 2 (04:55):
I want to put in the box.
Speaker 1 (04:56):
I want to put in the safe for my real estate,
I want to put that in inside this trust that
I've created. So it's as identifying all of these different
assets that you have as part of that funding. Now,
not everything, though, is going to go into your trust.
Will often tell clients, particularly married clients, not to put
(05:19):
their motor vehicles inside their trust, and that has to
do with a unique protection that they have for the
real estate as married couples. Another example are retirement accounts,
things like I rais and for one case, normally, well,
you certainly don't want to retitle those accounts in the
name of your trust because if you did that, you're
(05:40):
basically cashing the account in and you're going to pay
all the taxes due. The question with your retirement accounts
is going to be should your trust be named as
the beneficiary on those accounts. The answer to that question
is going to occur when you It's going to be
(06:01):
obtained when you have that conversation with your tax advisor
and the custodian of the account, because there are tax
considerations that can come into play when you put those
sorts of assets inside the trust. That's why you need
to have appropriate tax advice and advice from the custodian.
Speaker 2 (06:24):
Of that account.
Speaker 1 (06:28):
Now, let's ask this question, what happens if you don't
fund it. Let's just say you build the box, you
don't put anything in it, or do you build the
safe you don't put anything in. Well, think about that,
you've probably spent a fair amount of money to having
the trust created. You've basically wasted your money because the
trust isn't doing anything for you. The trust isn't doing
(06:49):
anything till it has assets to control. And if one
of the reasons that you created the trust was to
avoid probate, which is one of the most common reasons
that people will have for creating a trust, the assets
that you haven't put into the trust might now have
to go through probate. So you create this trust to
(07:12):
avoid probate, you don't put your assets in it, and
then your assets go through probate, which defeats your whole purpose,
or at least perhaps a primary purpose of your having
the trust. Now, most of the time attorneys are going
to as part of your trust package, and it certainly
is this way in our office going to include a will.
(07:35):
It's what lawyers generally call a poor over will. It
doesn't say poor overt on it. But the idea is
that if you have assets that you didn't fund, they
will then go into the trust after your death. But
and this is a big but, they have to go
(07:56):
through probate first. So the prore overwill, he essentially says,
any assets that you didn't put in your trust that
now go through probate. When probate is finished, now they
go into your trust. So again, if a goal of
yours was to avoid probate, relying upon your poor overwill
(08:20):
to transfer assets is basically requiring probate to occur. The
whole point, the whole point of having a poor overwill
is just in case, just in case you forget to
put something in the trust, or maybe you acquire a
new asset down the road and forgot to put it in,
or you didn't get around for some reason to putting
(08:41):
assets in the trust. So it's there. I liken the
poor overwill to.
Speaker 2 (08:45):
The backstop behind the catcher.
Speaker 1 (08:47):
Hopefully every pitch that has thrown the catcher catches, but
if the catcher misses one, the back stop keeps it
from going into the stands. Next question, then, so how
do you fund it? How do you go about this
process of funding your trust? Well, it normally isn't that difficult,
(09:10):
but it does take attention to detail you're going to
have to start by creating a list of what you own.
If you're working with our office and we're preparing a
traditional estate plan, will normally give you a trust funding
tracker for that, but it's to get information. Put it
in writing. Where are your bank accounts, where are your
(09:32):
investment accounts? Do you have stock that's not inside an
investment account, maybe owns consumer power stock and it's not
inside your trust? Real estate? Gather up the deeds to
the real estate. That also includes information on timeshares, that
you have business interest, Do you have a corporation, do
(09:52):
you have a limited liability company, et cetera.
Speaker 2 (09:55):
Gather up all of that sort of information.
Speaker 1 (09:58):
And of course don't forget about life insurance because life
insurance much of the time is going to be something
that you're going to fund into your trust. So once
you gather all of that information, it's then going through
the process of transferring those assets into your trust. Let's
(10:25):
use an example of a bank account, since pretty much
everybody has a bank account. How do you normally fund
a bank account into your trust? Well, normally today in
the state of Michigan, what you're going to do is
you're going to go to your bank or your credit
and you're going to say, look, I created a trust.
I need to fill out the paperwork that you have.
(10:46):
They will have that paperwork so that when I die,
what's left in my bank account goes into my trust,
essentially making the trust a beneficiary on your account. Now
some places are going to call it a beneficiary. Some
are going to call it a TOD, which means transfer
(11:08):
on death.
Speaker 2 (11:08):
Some will be calling it.
Speaker 1 (11:09):
A POD, which means payable on death. Essentially, they all
mean the same thing. But it's making sure that the
paperwork is completed at your bank or credit union so
that upon your death, the account will now be owned
by your trust.
Speaker 2 (11:25):
You don't what does that mean.
Speaker 1 (11:26):
That means you don't have to transfer it to the
to the trust. Now, you don't have to transfer the
bank account to make it owned by your trust.
Speaker 2 (11:35):
Now.
Speaker 1 (11:35):
It used to be that's what we had to do.
So we'll have clients with older trust where they actually
had to make their bank accounts retitled in the name
of the trust. But laws of change in the state
of Michigan which makes it much easier, and most of
the time we're simply going to make the.
Speaker 2 (11:52):
Trust the beneficiary on the account.
Speaker 1 (11:56):
Real estate going to have to have deeds prepared for
real life state. If you've got investment accounts, most of
the time you can have those payable upon your death
to the trust.
Speaker 2 (12:09):
Now, if you have individual.
Speaker 1 (12:10):
Shares of stocks such as Consumer's Power as my example,
it's going to be required that you're going to have
to have that stock transferred into the trust. But there's
a process going through and identifying the assets that you have,
making sure that you track. When that's done, you send
you get paperwork from your bank showing that it's been done.
(12:32):
Put that paperwork with your trust. You have banker work
from your investment company showing that the account that you
have there is now payable to your trust. Excuse me,
make sure that you keep all that paperwork and track.
Speaker 2 (12:49):
What you are doing. A question that is.
Speaker 1 (12:53):
Frequently asked though, is can I still use and control
my assets after I my trust? Well, the answer to
that is going to depend upon what sort of trust
you have. Is it a traditional revocable living trust or
(13:13):
is it an irrevocable trust. Important Now, most of the time,
the traditional trust that's part of a traditional estate plan
is a revocable living trust. If you're not sure what
that means. I invite you to listen to other episodes
of this program where I explain the difference. But if
it's revocable, yes, you still retain full control. You can
(13:37):
use your assets, you can spend your money, you can
sell your house. You can give assets away just as
you did before. So you are not losing control of
those assets by funding them into your trust. Important consideration.
(13:59):
You have your trust created, you fund your trust, make
sure that it is kept up to date. Life changes, right.
You might buy a new house, you might open a
new bank account, you might inherit something from a relative.
All of those assets are now new assets that you
(14:22):
didn't own at the time your trust was created. You
need to make sure that you have at least an
annual review of assets to double check to make sure
that they have appropriately been funded. Or just tell yourself
a major asset like buying a new house that's a
big one. Don't wait for a year to decide to
(14:46):
have a deed done. Have that done at the time
you are buying the house, but on at least an
annual basis good idea. Check your state planning documents, and
that's going to include check you your funding to make
sure that it is all up to date. Remember, at
(15:06):
the end, your estate plan or your trust if you
have one, is only as strong as your trust funding.
If you're unsure whether your trust is properly funded or
you haven't touched it in years, reach out to the
attorney that prepared it for you and have a review,
(15:29):
or you can always contact our office. I'll talk a
little bit later shortly in the program about how you
can go about doing that. Well, thanks for listening to
this episode of about funding your trust, and until the
(15:50):
next time that we get together, I hope you have
the opportunity to review your trust and review your funding
to make sure that is everything is appropriately in place
for you. Of course, Amanda and I would be honored
(16:30):
to have the opportunity to help you if you have
questions about funding or putting together your estate plan, perhaps
amending a plan that you already have, or assisting you
in settling a loved one's estate. You can have an
in person consultation at our Grand Rapids headquarters or at
(16:52):
our Lancing location. We have virtual consultations via Zoom or telephone,
so we can likely assist you wherever you happen to
be in the state of Michigan, and we have our
legal store where you can order individual documents. Let's say
all you need is a new certificate of trust because
(17:13):
you've got property that you need to sell as a
trustee of a trust. All of those things, scheduling in
personal consultation, scheduling virtual consultations, or ordering individual documents can
all be found at our website, Doyle LAWPC dot com.
So I invite you to go there, schedule your consultation,
(17:36):
order your individual documents, and now I think that is
going to be it for today's show. Though, as always,
if you have a comment about the program, a topic
(17:59):
that you'd like to have me discuss, their questions that
you'd like to have answered, head on over to Tuesday
with Tom dot com. Leave a voice message by clicking
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That would be Tom at Tuesday with Tom dot com.
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(18:22):
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Follow the office as well at Doyle LAWPC, and don't
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Speaker 2 (18:41):
We think might be of interest to you.
Speaker 1 (18:43):
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(19:06):
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(19:29):
thanks again for spending some of your time with us
to do today, and as always, I hope that you
have an awesome day and an awesome week in Michigan.
Speaker 2 (19:44):
Stay safe.
Speaker 1 (19:48):
Tuesday with Tom has been brought to you by the
estate planning attorneys at Doyle Law PC. To learn how
we can help you with your estate plan or with
settling a loved one's estate, please call it today at
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