Estate attorney Mark Kohler explains why most people's living trusts fail: they never fund them. You need to transfer real estate, bank accounts, and investment accounts into the trust, and name it as a secondary beneficiary on retirement accounts. Without funding, the trust is just an empty shell.
Chapters
The step most people miss after setting up their trust. The funding procedure. Here's the biggest mistake they make. They've got this beautiful trust signed, notarized. Everybody knows what's going on or the people. You want to know what's going on, but it's empty. Nothing's in it. You didn't transfer all of your assets into it so it could take effect. Let's go through some of those assets first. Real estate. You need to deed your primary residence, your home and any LLC that own rental property into your trust. Your trust should own all of your entities and it doesn't trigger a tax to make these transfers. We're going to transfer all that real estate into your trust and it continues to maintain your homestead protections. Bank and investment accounts. We also want to do what's called COB or change of beneficiary designations and forms so that all of these financial accounts are actually owned by the trust. Now remember, you're the trustee while you're alive, so don't stress. No one takes over or takes control until you pass away. And if you're married, you would be co trustees of your revocable living trust. Also, let's think about retirement accounts. They go into the trust as well. We want that beneficiary to be the retirement account. Now normally your spouse would be first, but the trust is second. No one really owns a retirement account. It's just who's the beneficiary. And we want that trust to be a backup. So if you've got a 10 year old or an 18 year old or a 30 something that acts like a 15 year old, you want those retirement accounts to go to your spouse first and then into the trust where the distributions can be according to your rules.
