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Author: Brenton McWilliams

Is Your Alabama Trust Funded?

If you are using a revocable trust for your estate plan, the trust should be funded. When using a revocable trust for an estate plan, typically, one of the primary goals is avoiding the need to file an estate in probate court. Avoiding probate court may be a goal for multiple reasons. (See this article for a discussion of the primary goals with trust planning and a general discussion of the pros and cons of using a trust). If the estate beneficiaries live out of state, it may be more convenient for them to avoid any interactions with a probate court in Alabama. Keeping the estate out of probate court will avoid the additional expenses of a probate court administration and, possibly, help minimize the likelihood of litigation between the estate beneficiaries. To accomplish this goal, assets which would otherwise be included in the probate estate, must be funded into the trust.

What Does It Mean to Fund a Trust?

To fund a trust, ownership of the property is transferred to the trust. Funding is also sometimes referred to as placing assets within the trust. Once the trust owns the property, it is subject to administration by the trustee according to the terms of the trust. Although there’s no standard form for a revocable living trust, most will be drafted so that there is no functional difference in the treatment of the property after it’s placed in trust, at least during the lifetime of the person creating the trust. The property can be moved in and out of the trust, it can be sold and exchanged and generally treated as if it was owned outside of the trust.

What is a Pourover Will?

When a revocable trust is created for an estate plan, a pourover will is usually created simultaneously with the trust. The pourover will serves as a backup for unfunded property. When using a revocable trust, the goal is for all property to be included in the trust or transfer on death through other means such as a right of survivorship or beneficiary designation. However, sometimes property ends up as part of the probate estate when property is overlooked or later acquired property is not added to the trust. For property that ends up in the probate estate, the pourover will pours these probate assets over into the trust. After the probate assets are poured into the trust, the assets are held by the trustee and administered according to the terms of the trust.

If you need help with estate planning, please call me at (251) 215-9275 or write me on the contact page to discuss how I can help.