Congrats on setting up a trust! You’ve taken an important step to ensure a smooth estate settlement process for your heirs. However, did you know that establishing your trust is only the first step? After creating a trust, you must fund it. If you skip this important step, you miss out on the benefits and protections of your new trust.
We know funding your trust can seem overwhelming–which is why we created this guide to simplify the process. Before we walk you through the steps to fund your trust, let’s take a moment to define a few key terms.
Trusts are popular estate planning tools that allow you to transfer property to a third party– known as the “trustee.” It’s vital to designate a trustworthy and reliable trustee–since they will be responsible for ensuring your assets are distributed according to your wishes.
Common reasons people create trusts are to protect and provide instructions for distributing wealth to minors, disabled children, or pets after they are gone. Many appreciate the flexibility and customizable nature of trusts. For example, you can specify the age your children receive their inheritance and spread out the distributions over time to avoid your heirs receiving a large sum all at once.
Depending on the type of trust you establish, you will still have full control over the assets you transfer into the trust–as with a Living Trust.
Many people choose to create a Living Trust, also known as a Revocable Trust. A Living Trust is an estate planning tool that allows you to control what happens to your wealth while you’re alive and after your death. Most prefer this option to irrevocable trusts–which require permission from the beneficiaries to make any changes to the document once it’s created.
Living Trusts and wills have the same purpose–to specify how your assets should be distributed once you die. However, a key difference is that your assets will pass directly to your beneficiaries without needing to go through probate with a Living Trust. If you only have a will, your property will be subject to your state’s probate process, and it could be months or even years before your wealth is distributed to your heirs.
There are several benefits to establishing and funding a trust. The advantages include:
When people decide to establish a trust, they often overlook a crucial step of the process– the actual funding of the trust. When you fund a trust, you are simply transferring ownership of your personal assets to the trust. In doing so, you still have access to your assets but with enhanced protections.
This step is crucial because if you establish a trust but don’t take the steps needed to retitle your assets into the trust’s name, you won’t avoid probate– which is likely one of your reasons for creating a trust in the first place.
Funding a trust doesn’t have to be complicated–though the process can vary depending on the type of asset. If your estate attorney gave you a list of assets to retitle into your trust’s name, start going down the list and filling out the required paperwork.
Assets that are typically transferred into trusts include:
You can transfer most of your bank and non-retirement investment accounts into your trust. To complete this process, you must retitle the accounts from your name into your trust’s name. Each bank has a different process but will typically require a trust application form and proof of your trust’s existence– usually in the form of a “Certificate of Trust” document.
If you’re unsure of the paperwork required by your financial institution, give their customer service number a call and explain that you’d like to transfer your account into your trust’s name. Alternatively, you can hire a legal service such as deedclaim.com or a local attorney to help establish your trust and provide step-by-step instructions on how to fund your trust.
One way of funding a trust is with real estate. This usually involves signing a deed to transfer the property into the trust’s name. Requirements can vary, which is why it’s essential to check with your county to learn more about the paperwork needed.
Moving your property into a trust is particularly beneficial if you own real estate in multiple states. If the property is in a trust, it won’t have to go through probate in each different state.
Though many of your assets can fund a trust, some are best left out of it. These are your retirement accounts, life insurance policies, and annuities. Generally, it’s unnecessary to transfer assets that already avoid the probate process due to beneficiary designations. An account with this designation automatically passes to the beneficiary upon the death of the original account owner.
Your trust has the power to manage and protect your assets and avoid the complicated probate process– but only if you fund your trust. Trusts are a valuable estate planning tool, but not until you’ve transferred your assets.
Though funding a trust might seem intimidating, it is essential to enabling your loved ones to avoid the court and attorney-involved probate complications when you pass away.
Assets titled in the name of your living trust can be distributed to your trust beneficiaries when you pass away outside of the cumbersome probate process. You can transfer your financial accounts to your trust without cost by working with your financial institution. You have several cost-efficient options to transfer your real estate to your trust, and have that transfer recorded in the appropriate county or parish land records. You should make your property insurer aware that your trust is the new owner of the property so that they can name your trust as an additional insured.
If you’re looking to take the guesswork out of the process–we can help! MyAdvocate helps people in all 50 states create affordable, legally valid wills and trusts. Additionally, we provide step-by-step instructions to make the process of funding your trust as straightforward as possible. Click "Take the assessment" below to get started.
This post was written by MyAdvocate's team of estate planning attorneys.