How To Fund Your Living Trust
Many people choose a revocable living trust instead of relying on a will or joint ownership in their estate plan. They like the cost and time savings, plus the added control over assets that a living trust can provide. When properly prepared, a living trust avoids the public and often costly, court processes at death (probate) and incapacity (conservatorship or guardianship). It can let you provide for your spouse without disinheriting your children, which can be important in second marriages. It can save estate taxes. And it can protect inheritances for children and grandchildren from the courts, creditors, spouses, and irresponsible spending. However, many people make a major mistake in that they do not properly fund their trusts.
Funding your trust is the process of transferring your assets from you to your trust. To do this, you physically change the titles of your assets from your individual name (or joint names, if married) to the trustee of your trust. You also will change beneficiary (or contingent beneficiary) designations to your trustee.
The trustee you name for your living trust controls the assets in your trust. Most likely, you have named yourself as trustee, so you will still have complete control. Remember, one of the great features of a revocable living trust is that you can continue to buy and sell assets just as you do now. You can also remove assets from your living trust should you ever decide to do so.
If you have signed your living trust document but haven’t changed titles and beneficiary designations, your trust will likely not achieve the desired results. You may have a great trust, but until you fund it (transfer your assets to it), it doesn’t control anything. Your revocable trust can only control the assets you put into it. If the goal of your living trust is to avoid probate at death and court intervention at incapacity, then you must fund it now, while you are able to do so.
If you have a trust, your attorney should have prepared a “pour over will” that acts as a safety net. When you die, the will “catches” your assets and “sends” them into your trust. If you have forgotten to transfer an asset or two into your trust, the asset will probably have to go through probate first, but then it can be distributed according to the instructions in the will, to your trust.
You are the one ultimately responsible for making sure all of your appropriate assets are transferred to your trust. Most attorneys will transfer real estate into the trust, and will provide forms and instructions for your other assets. Often they will include sample letters or blank forms for you to use. The funding process is not difficult. Because revocable living trusts are now so widely used, you should meet with little or no resistance when transferring your assets into your trust.
Even though the process is not difficult, it can be easy to get sidetracked or procrastinate. To prevent this from happening, make funding your revocable living trust a priority or pay an attorney to assist with all aspects of the funding. Remind yourself why you are doing this, and look forward to the peace of mind you’ll have when the funding of your trust is complete.