New York Estate Planning & Elder Law Blog
While trusts grow in their popularity and usage, some people still encounter difficulties in creating a trust. One problem that some clients face is banks and financial institutions who create challenges in funding a trust.
While this problem is not all that common, it is still helpful to understand why these challenges can arise. This article also reviews some of the benefits that people commonly realize through the creation of a trust.
Common Challenges involved with Trust Funding
Some of the most common challenges that people encounter with funding a trust include:
- Additional information. Most people who have engaged in any type of estate planning know that there are many documents involved. If you fail to provide the bank with the appropriate documentation, you could likely encounter difficulties in funding a trust.
- Improper titling. There are some situations where a bank might not be able to title an account in the way that a person requests. For example, qualified accounts like IRAs cannot be in the name of a trust.
- Problems communicating. There is a potential that a financial institution might not have understood your request. In these situations, it is possible that the bank might not understand you were asking them to do.
- Banks that don’t understand how trusts work. The digital age has led to the creation of many new banks, including some institutions that only exist lines. While it is rare, there have been cases where these banks have declined to allow the funding of a trust.
Benefits of Creating a Trust
While several challenges can arise in funding a trust, there are also some distinct advantages. Some of the benefits to be gained from the creation of a trust include:
- Control. If a person becomes incapacitated, a properly funded trust can be used to make sure that assets remain available for the person’s case. The terms of a trust can also later control how assets in the trust are distributed.
- Protecting your legacy. Trusts that properly created can be advantageous in protecting your assets from collection attempts by creditors.
- Avoiding probate. Assets that are located outside of a trust must pass through probate, which is both time consuming and eats away at the number of assets that beneficiaries will ultimately receive. By creating a proper trust, it is possible to avoid these complications.
- Gift control. Some people can utilize gift tax advantages by gifting assets to loved ones while the asset owner is still alive. This can be an excellent way to avoid tax repercussions, but by passing these gifts through a trust, the asset owner can establish control over how assets are distributed.
Speak with an Experienced Trust Planning Lawyer
Creating a successful trust is worth its benefits despite the numerous challenges that can arise.
If you need the assistance of an experienced estate planning lawyer, do not hesitate to contact Ettinger Estate Planning today to schedule a free initial consultation.