Why is Funding a Revocable Living Trust so Important?

You can think of a Revocable Living Trust as a shell or empty basket that must have assets placed into it so that such assets are subject to the terms of the Trust. The first step to creating a Revocable Living Trust is executing the proper documents with the correct signing formalities. Specifically, in Florida, a Revocable Living Trust must be executed in front of two witnesses and a notary. The statute actually refers to the execution requirements of a last will and testament in its statutory language when discussing the execution requirements of the revocable living trust. Florida has one of the most stringent requirements for formation. For instance, in Louisiana, only a notary is necessary to property execute a Revocable Living Trust document. Therefore, a trust established in Florida will likely be valid under most state laws/jurisdictions.

Once the Revocable Trust Agreement is executed, assets need to be transferred to the custody of the Trustee who is managing the Trust Fund. Typically, the initial Trustee is the Settlor/Grantor and/or his or her spouse and the successor Trustees are either family members or independent trustees (such as a bank) in the case where choosing family members is not the most prudent choice. Sometimes, choosing an independent Trustee can limit the potential for dispute.

The reason why funding a Revocable Living Trust (or transferring assets to be subject to the document’s terms) is so important is because when this is not done, the Trust provisions do not apply to said assets.

Each asset has its own process for being “funded” into the Revocable Living Trust. For instance, the transfer of real property requires a deed. The transfer of business interests requires an assignment. Brokerage and/or bank accounts must be changed in the name of the Trust. This is by no means an expansive list, however, it is important to educate clients on the importance of transferring assets into the Trust. Without such transfer, the Revocable Living Trust is merely an empty vessel. Learn more about funding a Revocable Living Trust on our previous blog: CLICK HERE.

Contact The Presser Law Firm, P.A. if you or a loved one is interested in having an estate plan prepared. Our attorneys are knowledgeable in estate planning, asset protection and business law.