If you have a read our blogs or listened to our radio show and podcast, you will know that I’m a big proponent of Trusts. We use trusts for many of our clients, and there are many different types of trusts available.
When you set up a trust, think of it like you are creating a new legal entity, being the trust. The trust needs to own some property, for the trust to work. Getting your stuff into the trust is a process called trust funding. The problem is that lots of trusts that exist are unfunded, so they don’t work.
There Are Many Different Trusts Available – Which Is the Right One For You?
There are a number of different types of trusts available, including revocable trusts and irrevocable trusts. With irrevocable trusts, there are several categories such as the life insurance trust, the charitable trust, an asset protection trust, and a trust you might need for income tax planning. For a trust to work, it has to own assets and unfortunately, most law firms don’t fund trusts.
Many law firms will tell you a revocable living trust is a good idea because it is a management vehicle which helps to manage your assets during your life. It also makes it easier for post death administration and distribution when you pass away, while saving some money. There are many good reasons to consider a revocable living trust. Maybe you already have a revocable trust, but do you know what’s in the trust or if there is anything in it? If you don’t have anything in the trust, it’s not doing anything.
You Need to Understand How Trusts Work
These documents, or ‘tools’ such as trusts are designed to accomplish certain objectives. It depends what you want to accomplish, but trusts are useful for asset protection, tax planning and protecting the kids from their potential future divorces. It is important that you become educated about it, which is why we host our workshops. Visit sechlerlawfirm.com/workshops, and register for our “Three Secrets to Protect Your Legacy” workshop, which we host weekly in various locations in the Greater Pittsburgh region.
Let’s say somebody goes to a law firm and they have a trust. Maybe they went to a law firm 15 years ago and now it’s time to maybe reconsider updating the trust. However, most firms don’t do trust funding because it requires a lot of work. When you hire a law firm for a trust, they typically quote a flat fee, for this document. The way that most law firms operate is based on transactional law, because once the lawyer has completed what you’ve asked for, and you’ve paid them, it’s the end of the transaction. It’s often the end of the relationship between the client and the lawyer.
Many Law Firms Don’t Do Trust Funding
When people hire lawyers to create a trust, most lawyers don’t include in that initial fee agreement, that they will also do the work necessary to fund the trust once you have it. So you get the trust and you believe you have a good tool. You might have asked the lawyer what you can put into the trust, and he would have given you a letter which you both would have signed. In this letter, you acknowledge that you know you need to go to your bank or your financial advisor to fund your trust. When the lawyer gives you the letter, they absolve themselves from any responsibility. They don’t want the situation where a family comes back to the lawyer asking why the trust wasn’t funded.
In all likelihood, you probably forgot to get your trust funded, because you were confused about the process. It is also possible that your financial advisor did not know what to do, and could not help you.
We Do Things Differently
When I started my law firm, I also operated on a transactional basis. However, after some time I realised that it was not the right way to do estate planning. I believed that we needed to help our clients fund their trusts, which our law firm does. We have this philosophy where you are not a transaction. Our relationship does not end with our clients, when they get their documents. We offer our clients the opportunity to continue working with us. Instead of charging full legal billable rates, we offer an ongoing membership program, namely our Red Wagon Club.
One of the first things that we do after you sign your documents and join the Red Wagon Club, is set you up to meet with our funding coordinator. We have a full time employee whose job it is to fund trusts, and she will talk to you about what to do. She will help you fill out the paperwork, and you can then attend a class group to chat about and ask questions about funding. This is also where you can sign the documents in the presence of a notary. We’ve got this this process designed to help you fund your trust because we want your estate plan to work for you today, and tomorrow.
Change is Inevitable
While your estate plan is effective and will work for many years to come, we all know that life changes. Your goals are going to change, the laws will change, and the tax environment will change. You can’t leave your estate plan on the shelf and forget about for the next 15 years, because life changes. Within our Red Wagon Club, we host regular events, including a monthly class where we provide education. We understand that we need to communicate with our clients on a regular basis. Realising that our clients may forget, we need to help them remember how estate planning works. We have an annual review workshop to which we invite our clients to attend. This gives them the opportunity to update documents if needed.
To find our more about our Red Wagon Club, click HERE.
