Congratulations, you’ve created a living trust! But, you’re not quite done yet. In most circumstances you are going to want to fund the trust immediately. If your living trust is not properly and adequately funded, it will not avoid probate and will not provide for optimal management of assets during periods of incapacity.
Trust funding is the process of transferring property from yourself individually to the trustee of your trust, which is usually yourself. You must physically transfer assets into the trust, it is not automatic. For example, you might notify your bank to change title on your money market account from “John Smith” to “John Smith, as trustee of The John Smith Declaration of Trust dated January 1, 2013”.
The process shouldn’t be mysterious. The following is a summary of the most common classes of assets with a brief description of how they are typically transferred into a living trust:
- Real Estate. Title is transferred by a deed into trust properly recorded in the county where the property is situated. This should be prepared by an attorney.
- Bank Accounts. Generally requires only a “letter of direction” from the account owner(s) telling the bank how to re-title the account.
- Stocks, Bonds, Brokerage Accounts. Generally requires: (a) letter of direction, and (b) a “stock/bond power.” Alternatively, many brokerage firms have their own proprietary trust account creations forms.
- Retirement Plans. Should never be re-titled into trust. Retirement accounts are dealt with through the beneficiary designation. In some cases, a trust may be the designated beneficiary. In other cases, this will not be advisable. Special care and consideration should always be given to retirement account beneficiary designations.
- Life Insurance/Annuities. Ownership may sometimes be transferred into trust. The trust may also be a designated beneficiary. Both decisions should be made in consultation with your estate planning attorney.
- Automobiles. If an automobile is owned outright (no loan), then title may be held in trust and registered with the Secretary of State, if necessary.
- Personal Property. Unlike the other assets on this list, personal property generally does not have a formal title to change. An Assignment will be executed to transfer ownership of personal property into trust.
- Other. Other assets that are sometimes transferred or assigned into trust include notes payable to you, business and partnerships interests, oil and gas leases, intellectual property and interests in estates.
Some financial institutions may provide you with their own forms for transferring property into trust. In any case, we provide clients with the necessary forms and instructions to complete the funding process. As you acquire assets from time to time after your trust has been created, they may generally be titled directly into trust.
For all trust funding, you should always consult directly with your estate planning attorney to determine which assets should, or should not, be transferred into trust given the totality of your estate plan.
The Law Offices of Jeffrey R. Gottlieb places special emphasis on educating clients about trust funding and providing the necessary tools to do so. As part of this process, we provide clients with a wallet Trust ID card that displays the correct title of the trust, and on the flip side, provides our business card for handy reference to contact us if necessary. We also provides clients with a more detailed memorandum with instructions on how to fund a trust.
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