What is Funding? And what is FUN about Funding?
Yes, you read the headline correctly. We want to make funding FUN. First, let’s answer the question about what Funding is in the first place.
Funding is the process of connecting all of your assets, accounts, and insurance policies, to your estate plan. If you have a trust, this is the process of transferring ownership to your trust or naming your trust as a beneficiary.
What IS Funding, Anyway?
The purpose of this article is to answer many of the Frequently Asked Questions we receive related to Funding and give you the first look at a new funding program we are starting this September with room for only 15 clients that will put the FUN in Funding.
How and When do you make the Trust the OWNER? For real estate, we can do a quitclaim deed. If you own property outside of Georgia, we’ll need to hire an attorney to make that change for you.
For checking or savings accounts, we give the Certification of Trust with the excerpts from the trust, to the banker and request that they assist us in either making the trust the owner of your current account or creating a new account with the Trust as owner. Most of the time the bank will create a new account.
What happens to all my auto deposits or automatic bill payments? When the new account is created, you can move your automatic deposits of income or bill payments over to the new trust account. This is where many people “make a mountain out of a mole hill” as my dad says from time to time.
That sounds like a lot of work! Is it a lot of work? No, it actually is not very hard to do at all. You keep both your old checking account open and the new checking account open and you can gradually move everything over. I have changed banks for my personal accounts and business accounts in the last year and it took me about an hour to move the bill payments over and less than an hour to schedule the new direct deposit for my pay check. Check the old checking account daily, then weekly to make sure you didn’t miss anything. You can leave the old account open for several months to catch any payment that happens less frequently such as a semi-annual payment of dues to your Home Owner’s Association or semi-annual car insurance payments. When you believe all the deposits and payments have been moved to the new account, then close the old checking account.
Am I still in control of my account when my trust is the owner? If you have a revocable trust, yes, you are in control. Look at your trust in Article one. You will see that you are the person who made the trust called a Settlor or Grantor and you are also the person in charge of the trust called the Trustee. A trustee does everything you did as an individual before you had the trust. Trustees choose investments. For example, you might find a great interest rate on a Certificate of Deposit and move some funds to the bank with the great rate (and remember to put the account in the trust name – wink, wink). You can open an account in the trust name at your brokerage firm and choose investments for the trust funds there including mutual funds, individual stocks, indexed funds, ETFs and more!
Anything you can do as an individual, you can do as a trustee with just a few exceptions. A trustee cannot exercise stock options given to an individual employee and a trustee cannot handle the lawsuit or receive the settlement funds resulting from litigation such as for a car accident. The example here is: Mom and dad both do trusts. All assets are placed in trust. Mom is killed in a terrible car accident and dad sues for recovery and wins. The settlement is payable to Mom and not to Mom’s trust. We can’t put expected settlements from unknown or nonexistent claims into a trust.
What about my taxes – will a trust mean I have to file a separate return for the trust? No. While you are living the IRS treats any money the trust earns as money you earned. You simply note that you own the trust on your K-1 schedule. A revocable trust is a “see-through” or “pass-through” entity according to the IRS. That means that anything your trust does is like you doing it individually. This is the same rule that applies to single owner LLCs. The LLC income is simply reported on your individual tax return. Now sometimes there is a separate return that is filed, but, for revocable trusts, you will only need your regular single individual return. Remember there are always exceptions to every rule. If you are nervous about your own situation, we always recommend talking with a Certified Public Accountant (CPA) before pulling the trigger on an estate plan. Pay for the consult and then you can feel assured that what I’m explaining here is true.
Our funding recommendations are different when you are using an irrevocable trust. We use irrevocable trusts for two reasons: (1) High Networth Individuals and Families and (2) Individuals and Couples with less than $1.3 Million each who want the added protection and flexibility that an Asset Protection Trust can provide. Funding recommendations are different because we are applying a different strategy and going for a different outcome.
If you have an irrevocable trust, you are not likely to put your checking account into the trust. Instead, you will make the trust the beneficiary for two reasons: First, the reason we use an irrevocable trust is often to protect your biggest asset (your home) and extra cash that is countable by Medicaid protected from the Medicaid Estate Recovery Policy and to provide greater flexibility for the family. Second, because the purpose of the trust is different from the reason we use a revocable trust, we recommend that different decisions be made when it comes to funding. In general, the trust is the beneficiary of all accounts and not the owner because this gives the clients continued control over income, retirement and some savings and allows the trust to own the home and countable cash and remain in the background without much to do for a while.
When Is It Time To Update?
Ok. What should you do with this information? Our newsletter is sent to our client base and referral sources. We try not to bug you more than a few times per month. I would love it if our clients came back to see us once every 3-5 years or every time something big happens in their lives – a new Decade, a Marriage, a Divorce, a New Account, a New Business, a New Focus, a Death.
Why should we come in every 3-5 years? An estate plan is an awful lot like anything else in life. It requires work to maintain it. I’m sure you have never met someone who thought that they could stay married for 50 years without putting work into the relationship. You’ve probably never met anyone who thought they could drive a car for 30,000 miles without an oil change. The fact is that change happens – constantly – all around us. Yes, the laws change and the way banks and hospitals work changes, and our family changes when kids move away, have babies, deal with a health issue. What we sometimes forget is that we change too. The way we make decisions today is not the same way we made decisions 10 years ago. We are different people in 2026 than we were in 2016. I was a mom of a three-year old in 2016 and now I’m a mom of a soon-to-be teenager. My relationships with friends have changed. My relationships with banks and other vendors have changed. You are changing too. The one thing I want most for all of our clients is for the plans we make to actually work. I want you to be the hero you want to be for those you love. The way to do that is by adopting a good estate planning hygiene routine.
Here’s how good estate planning hygiene works. Come in to see us once every 3-5 years. Because we’ve done a few of these and we have found that some of you want to come in, get a thumbs up from me, and not really do any work, here’s how we are doing it now. We will review the file before you come in. We will see what changes you committed to completing prior to coming to see us and make a list of the items we are showing as incomplete. We can resend the link for the Asset Spreadsheet and Funding folder to you so you can get in on the action to prepare for the meeting too. Often, clients have done the work, they just haven’t sent us verification that the work is complete. We are looking to see if we have written evidence in the file that your trust or your beneficiaries are named on each account and asset. If they aren’t, we’ll set new deadlines to get it done in our meeting and re-connect you with our funding concierge to get it done. We’ll also help you get your instruction letters and your love legacy letters started or finalized.
Celebrate your “Done Date”
The FUN in funding is being DONE. We want each of you to have a “Done Date” and we want to celebrate your Done Date with you. This year we are offering a new funding program that will run from September to December and January to April. We will be offering two funding bootcamps over then next year – one the first week of January and one the first week of May – for those of you who want to knuckle down and knock it out in a few days.
The Estate Plan Reviews are $750 right now and through the end of this year. If it’s been 3-5 years, let’s get together and check the alignment on your plan. If your funding isn’t done, let’s tackle the incomplete tasks and get your DONE DATE.
Who is ready to get their “Done Date”?
