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The Pitfalls of Unfunded Trusts

February 14, 2014General

Funding the Trust is an essential but often overlooked step towards avoiding a lengthy and expensive probate.  Creating a trust instrument, with all of the appropriate instructions, provisos and expressions of intent, is worse than useless if no step is taken to fund the trust by transferring assets into the trust.  Even when attorneys draft the trust instrument, they have been known to assume that clients will take this important step without explaining to them the need and importance.  The trust consequently remains unfunded.
An unfunded trust is similar to a bank account with no money in it, but it is worse than that because of the increased potential for disputes.   If the distribution specified in a trust is different than the distribution of non-trust assets, chances are good that a fight will occur among the variously affected beneficiaries. Sometimes disputes are avoided because the distribution is the same in or out of the trust.  For example, if the decedent also left a will that states that all assets are to be transferred to the trust, then the distribution is the same whether the asset is in the trust or in the probate estate.  But even in that case a lengthy and expensive probate will be required to transfer the assets into the trust, an unnecessary waste.

Fortunately, funding is relatively simple and painless.  Transferring real estate may take more effort, but most attorneys who draft the trust instrument will also transfer the real estate as part of the estate plan.

In the meantime, it pays to remember that once the ink is dry on the trust instrument, the work of setting up a living trust is not yet done.  Assets still need to be transferred to the trust in order for the trust to be effective.

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Caprice Collins

Caprice Collins

Attorney Caprice L. Collins is a top rated Harvard Law School graduate. She has 34 years of legal experience with a successful law practice devoted exclusively to Estate/Business Planning and Trust Administration. Attorney Collins is a well-respected keynote speaker on Wills, Living Trusts, Estate Planning, Business Planning and Trust Administration. She has appeared on California’s Real Estate Radio Station KTLK AM 1150 as a legal expert on Estate Planning and Living Trusts among many other notable media appearances.
Caprice Collins

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Testimonials

Ms. Collins and her team has earned my trusts and respect. They showed professionalism, attention to details and made me feel like I am family. It is truly reassuring to know that my family and I won’t he on our own after the documents are executed.

Saida H.–
My overall experience with Collins Law Firm has been great. The process of estate planning was thoroughly explained with personal care and concern. The entire staff is very personable and eliminate any intimidation. I feel very relieved to have completed this process and I am very comfortable in knowing that Collins Law Group is available to us for any needed help.

Mattie S.–
We received excellent and clearly explained directions with respect to the creation of our living trust and the required follow up actions. Caprice is easy to work with and she inspires full confidence in her abilities. We continue to work with her as we review changes in our lives and the adjustments required to insure that our trust does what we want it to do.

John C.–
Attorney Collins was referred to us by a friend who had a living trust prepared for his family. We attended one of her very informative seminars on living trusts. Shortly there after we had out trust done.  She is very thorough, precise and follows up to ensure we’re satisfied with our estate plan. The staff was wonderful as well.

Tony B.–
We’ve had Living Trusts done by two different attorneys over the last 12 years. After retaining the Collins Law Group, it became clear that the others weren’t up to the same standard. Attorney Collins and her staff have an eye for detail that was absent from the other firms we used. It was the difference between dining at a gourmet restaurant, and a fast food drive-thru. The Collins Law Group is terrific at putting you at ease, and makes the process relatable and easy-to-understand. After watching other family members go through the ugly, hot mess of Probate, we definitely feel safe and in control of our estate and the legacy we’ll leave behind for our children.

Mr. & Mrs. Owens–

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