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Every dream home starts with a host of ideas that culminate in a vision that leads to the pouring of the foundation. Similarly, every estate plan starts with a lot of thought that ultimately shapes your living trust. Think of your living trust as laying the foundation for your family. It is the source through which you will communicate with loved ones your wishes related to managing and transferring property on your death or incapacity. A living trust will be amendable as long as you have capacity to make changes, but becomes irrevocable upon your death.
While a will may also be used to communicate these wishes, a trust is preferred in many states because property directed by the trust passes outside of the often expensive and time consuming process of probate. If you don’t have a will or living trust, your state’s default rules determine who receives your assets that don’t have beneficiary designations or aren’t jointly owned.
Just like when laying the foundation on a new home, there are additional steps that must be taken after drafting a trust to complete the job. For your trust to direct assets, you must fund the trust by transferring title of such assets to it. Titling assets accordingly lets financial institutions and your loved ones know that there is a thoughtfully-constructed rulebook that needs to be followed.
Next week, we’ll explain the role of a general contractor in your estate plan.