Creating a living trust is a significant step in planning for the future, but it is only effective if you follow through by funding it. Many people establish living trusts but overlook the important step of transferring assets into them. By understanding the consequences of this oversight, you can avoid unexpected problems.
Risks of probate
One of the main benefits of a living trust is avoiding probate, a process that can be time-consuming and costly. If you do not properly fund the trust, the assets you intend to include may still go through probate. This process can delay the distribution of assets to your beneficiaries and potentially involve court fees. It can undermine the purpose of setting up the trust in the first place.
Unintended inheritance risks
When you do not transfer assets into the trust, they may be distributed according to the terms of your will or New York’s intestacy laws. This means your assets might not go to the people or causes you intended. Properly funding a trust ensures that you protect your wishes and shield your loved ones from unwanted surprises.
Lost tax benefits
Funding a living trust can provide certain tax benefits and financial advantages. Without proper funding, you lose these benefits, which might result in a larger tax burden for your estate. It also creates unnecessary complications in managing assets, especially for those dealing with businesses or investments.
Ensuring peace of mind
The success of a living trust depends on thorough preparation and attention to detail. Proper execution ensures a smoother process and minimizes future complications. Overlooking critical steps can lead to unintended results.