How To Fund A Trust

Congratulations on Setting Up a Trust! Here’s What You Need to Do Next

Congratulations on setting up a trust! This is a significant step towards ensuring a smooth estate settlement process for your heirs. However, establishing your trust is just the beginning. To fully benefit from your trust, you must fund it. Skipping this crucial step means you miss out on the protections and advantages of having a trust.

We understand that funding your trust can seem overwhelming, so we’ve created this guide to simplify the process. Before diving into the steps for funding your trust, let’s define a few key terms.

What Is a Trust?

A trust is a popular estate planning tool that allows you to transfer property to a third party, known as the “trustee.” It’s crucial to choose a reliable trustee, as they will be responsible for ensuring your assets are distributed according to your wishes.

People often create trusts to protect and manage wealth for minors, disabled children, or even pets. Trusts offer flexibility and customization; for example, you can decide when your children will receive their inheritance and spread out the distributions to avoid a large lump sum.

With certain types of trusts, like a Living Trust, you retain control over the assets you transfer into the trust.

What Is a Living Trust?

A Living Trust, also known as a Revocable Trust, allows you to manage your assets while you’re alive and after your death. This type of trust is popular because it offers more control and flexibility compared to irrevocable trusts, which generally cannot be altered without the beneficiaries' consent.

Living Trust vs. Will

Both Living Trusts and wills serve to specify how your assets should be distributed after you die. However, a key advantage of a Living Trust is that it allows your assets to pass directly to your beneficiaries without going through probate—a process that can be lengthy and costly. If you only have a will, your property will go through your state’s probate process, which can delay the distribution of your estate.

What Are the Benefits of Funding a Trust?

There are several advantages to establishing and funding a trust:

• Avoiding probate: A trust allows your assets to bypass probate court, which can be costly and time-consuming.

• Control over wealth distribution: Trusts offer flexibility in how and when your assets are distributed to your heirs.

• Privacy: A trust keeps your financial matters private, avoiding public disclosure through probate.

What Does Funding a Trust Mean?

Funding a trust involves transferring ownership of your personal assets to the trust. This step is essential because if you don’t retitle your assets in the trust’s name, you won’t achieve the goal of avoiding probate. Funding your trust ensures that your assets are protected and managed according to your wishes.

How to Fund a Trust

Funding a trust can be straightforward, though the process varies depending on the type of asset. If your estate attorney provided a list of assets to retitle, start with that list and complete the necessary paperwork.

Typical assets transferred into trusts include:

• Real estate

• Bank accounts and CDs

• Brokerage accounts (non-retirement investment accounts)

• Patents

• Business interests

• Collectibles or other valuable items

Funding a Trust with Bank Accounts

To transfer bank and non-retirement investment accounts into your trust, you must retitle the accounts from your name to the trust’s name. 

This usually involves completing a trust application form and providing proof of the trust’s existence, such as a “Certificate of Trust.” Contact your bank or financial institution for specific requirements, or seek assistance from a legal service or attorney.

Funding a Trust with Real Estate

Funding a trust with real estate involves signing a deed to transfer the property into the trust’s name. Requirements can vary, so check with your county for the necessary paperwork. Transferring real estate into a trust is especially beneficial if you own property in multiple states, as it avoids probate in each state.

What Assets Don’t Go Into My Trust?

Some assets should not be transferred into a trust, including:

• Retirement accounts

• Life insurance policies

• Annuities

These assets typically avoid probate due to beneficiary designations, which allow them to pass directly to the designated beneficiary upon your death.

What Happens if I Don’t Fund My Trust?

Your trust can manage and protect your assets and help you avoid probate, but only if it is properly funded. Without transferring your assets into the trust, you won’t achieve the full benefits of having a trust.

The Bottom Line

Funding a trust might seem daunting, but it’s crucial for ensuring your loved ones can avoid the complexities of probate. Assets in your living trust can be distributed directly to your beneficiaries outside of probate. You can transfer your financial accounts and real estate to your trust without significant costs by working with your financial institutions and local authorities.

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