Planning For A Secure Future

Don’t let these errors derail your California trust

On Behalf of | Jul 29, 2024 | Trusts

When it comes to securing your assets and protecting your loved ones’ future, establishing a fund is a step in the right direction. However, contrary to popular belief, the process does not end with signing the document.

Imagine buying a state-of-the-art safe to protect your valuables, only to forget to place your precious items inside. That is essentially what happens when you create a trust but fail to fund it properly. This oversight can lead to unexpected legal problems, probate proceedings and potential financial losses.

In California, where complex property laws and high estate values often intersect, understanding the common funding mistakes can mean the difference between a smooth transfer of assets and a lengthy, costly probate process.

Mistake #1: Failing to transfer real property into the trust

Whether due to a simple oversight or a lack of understanding about the process, many people forget to follow through with property transfer after creating a trust. This oversight can have serious consequences for your estate plan.

When you create a trust, you are essentially establishing a separate legal entity to hold and manage your assets. However, if you fail to transfer your real property – such as your home, vacation property or investment real estate – into the trust, these assets remain outside its protection.

Mistake #2: Not updating beneficiary designations

Many assets pass directly to named beneficiaries, bypassing your trust entirely. These include your life insurance policies, retirement accounts and investment portfolios. For instance, if you have a 401(k) account, the funds will go directly to the beneficiary you have listed for that account, regardless of what your trust says. By ensuring your beneficiary designations align with your trust, you can create a cohesive strategy that truly reflects your intentions for asset distribution.

The key to a successful California trust

When you create a trust, remember that this crucial estate planning tool is only as effective as its funding. By properly transferring your real property and keeping your beneficiary designations up to date, you are building a robust financial plan that will protect your hard-earned wealth and provide for your loved ones when the time comes.