Funding a trust refers to the process of transferring assets into a trust. Think about it like adding your treasure into your treasure chest. An empty chest does not protect your treasure from probate. Funding is a crucial step in ensuring that your revocable living trust is effective. Here are some common examples to illustrate this concept:
Real Estate: If you own a home and want it to be part of the trust, you must change the title of the property from your personal name to the name of the trust. For example, if John Doe creates the John Doe Living Trust, he would retitle his property from “John Doe” to “John Doe, Trustee of the John Doe Living Trust.”
Bank Accounts: To add your bank accounts to your trust, you would change the ownership of your bank accounts. The accounts would be retitled in the name of the trust instead of your name.
Personal Property: Items like jewelry, art, or other valuables can also be funded into a trust. This is often done through an assignment of personal property, a document that transfers ownership of these items to the trust.
The responsibility of funding a trust typically falls on the individual who creates the trust, known as the grantor, settlor or trustmaker. This is because the grantor has the legal rights and access to the assets that need to be transferred into the trust.
The creator of a trust often seeks assistance from professionals such as estate planning attorneys, financial advisors, or accountants. Professionals can guide the grantor through the process, ensuring all legal and financial aspects are correctly handled.
For a revocable living trust, it’s generally advisable to begin funding immediately after the trust is created. This ensures that the trust operates as intended, managing your assets during your lifetime and distributing them upon your death.
Additionally, whenever you acquire significant assets, such as real estate, it’s important to consider whether these should be placed in your trust. Keeping the trust updated with your current assets is crucial for effective trust management.
It’s also vital to fund your trust while you’re still capable of managing your affairs. This preparation helps in managing your assets if you become incapacitated.
Regular speaking with your estate planning attorney or financial advisor can help in making appropriate decisions regarding when to fund your trust.
This process varies depending on the type of asset. Here’s where and how different types of assets are typically funded into a trust:
Real Estate: To fund real estate into a trust, you need to change the deed of the property. This is done at the county recorder’s office where the property is located. The deed will be changed to reflect the trust as the new owner of the property.
Bank Accounts: For bank accounts, you visit your bank to change the title of the accounts. The accounts will be retitled in the name of the trust, and the bank will have its own forms and process for this.
Investment Accounts: Investment accounts, including stocks, bonds, and mutual funds, are funded into a trust by changing the registration with the investment firm or brokerage. This involves working directly with the financial institution where the investments are held.
Personal Property: Items like jewelry, art, or other collectibles can be transferred into the trust through a general assignment of personal property. This document assigns ownership of these items to the trust and is usually kept with your trust documents.
One of the primary purposes of a trust is to avoid probate. If a trust is unfunded, the assets may be subject to the probate process, losing one of the key benefits of having a trust.
Probate often takes more time and includes additional costs, like court fees, legal fees, and other expenses. These costs will reduce the amount of assets available to your beneficiaries.
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Real Estate: To transfer real estate, you need to execute a new deed transferring the property from your name to the trust’s name. For example, if John Smith owns a house, he would sign a deed transferring ownership from “John Smith” to “John Smith, Trustee of the John Smith Revocable Trust dated [date].”
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Bank Accounts: For bank accounts, you would go to your bank with a copy of your trust agreement and request that the account titles be changed to the trust’s name. If Jane Doe has a savings account, she would have the account retitled to “Jane Doe, Trustee of the Jane Doe Revocable Trust.”
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Investment Accounts: Similar to bank accounts, contact your brokerage or investment firm to retitle your accounts in the name of the trust. An account under “Michael Johnson” would be changed to “Michael Johnson, Trustee of the Michael Johnson Revocable Trust.”
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Personal Property: For items without titles like jewelry, art, or collectibles, you can use an Assignment of Personal Property. This document formally transfers ownership of these items to the trust.
- Business Interests: If you own a business, you can transfer your interest in the business to the trust through a transfer document, aligning with the business structure’s legal requirements.
Each type of asset has a specific process for transfer. It’s essential to follow the legal requirements for each to ensure the trust is properly funded. Working with an estate planning attorney can help navigate the complexities of funding your trust.