Assuming the client has expressed a desire to proceed with the estate planning process, I send out an engagement letter. This letter sets forth the arrangement between myself and the client. It gives a short explanation of the documents that I will be preparing on behalf of the client. The letter also sets forth the fee arrangement. Finally, the letter tells the client what specific information I will need to prepare draft documents.
Once the client has provided me with the required information, I prepare a draft of the various documents. Each page of each document has a "draft" watermark on it. I encourage my clients to carefully review the drafts, and to highlight areas they have questions about or to write questions in the margins. These rough drafts will be discarded and not be signed.
Once the client and I are satisfied that the documents reflect the ultimate wishes of the client, final drafts are prepared. It is these documents which the client will ultimately sign.
For a Trust to be effective, it must be funded. Funding refers to the process of having your assets owned by your Trust, or passing to your Trust after death. There are three ways to fund your Trust.
The first is to transfer ownership of an asset to your Trust while you are living. An example of this would be a deed which transfers ownership of your house to your Trust. Such a deed would be signed, for example, at the time your Trust is executed.
The second way to fund a Trust would be to make the Trust the beneficiary of an asset that allows for a beneficiary designation. This can be critical for families with young children. For example, a husband can have a life insurance policy with a $250,000.00 death benefit. Typically, the husband would have designated his wife as the primary beneficiary, and his children as the contingent or secondary beneficiaries. If the wife dies first, or the husband and wife die at the same time, the death benefit will be paid to the children. Two bad things can now happen. The death benefit will be paid into a court supervised account. Prior to the children’s reaching age 18, the only way that anybody can have access to the funds is to go to court each time and request permission from a judge for a withdrawal. This can be a very expensive and frustrating ordeal. Additionally, when the child reaches age 18, the funds will be paid out to them and they are free to do whatever they want with the money. This will be the case even if the husband had a Trust that said that his assets were to be distributed to his children only when they reached certain ages, for example 25 or 30. Unless the contingent or secondary beneficiary is the husband’s Trust, we can get the completely unintended result described above.
The third way to fund a Trust is through the provisions of the “pour over” Will, which is discussed under the Wills tab of this website.
Through a thorough analysis of the asset information supplied to me by the client, I can advise the client on how to effectively fund the Trust and can assist them in this matter.