Creating a trust is a vital step in estate planning, but it’s just the beginning. To make sure your trust works effectively, you need to complete the important step of funding it. But what does “funding” mean?
Think of your trust as an empty bucket. To make this bucket useful, you need to fill it with your assets. Funding your trust involves transferring your money and property into it. This process typically involves retitling your assets in the name of your trust and can be done in two main ways: (1) by changing ownership of your accounts and property to your name as trustee, or (2) by naming the trust as the beneficiary on certain accounts like life insurance or, in some cases, retirement accounts.
When your property is held in the trust’s name, it allows for a smooth transition to a successor trustee if you become incapacitated or pass away. This means your assets can be managed and distributed according to your wishes without the need for court proceedings (probate). Remember, only fully funded trusts help your loved ones avoid the probate process.
Funding your trust often requires working with financial institutions to retitle accounts and may involve signing new deeds for real estate. Here’s a breakdown of how to handle some common types of property:
Checking and Savings Accounts
Transfer your checking, savings, money market, and CD accounts into your trust. Contact your bank or credit union and provide them with a certificate of trust to facilitate the retitling. Be sure to check for any early withdrawal penalties on CDs before making the transfer.
Real Estate and Property Interests
For real estate and property interests, you’ll need an attorney to draft and record new deeds transferring these assets into your trust. It’s important to understand any potential property tax implications or other legal concerns.
Investment Accounts
Work with your financial advisor or brokerage to retitle investment accounts in the name of your trust. They will need a certificate of trust to complete this process.
Personal Effects
You can transfer personal items like furniture, jewelry, and collections into your trust by signing an assignment of personal property. Vehicles can also be transferred, though this may involve complex tax and insurance considerations. Consult your attorney to weigh the pros and cons.
Retirement Plans
Do not transfer retirement accounts like IRAs or 401(k)s into your trust as this can lead to negative tax consequences. Instead, consider naming your trust as a beneficiary if it aligns with your estate planning goals, and discuss the potential tax implications with your attorney.
Life Insurance and Annuities
Generally, name your trust as the primary beneficiary of life insurance and annuity policies to ensure the proceeds are managed according to your wishes. Make sure to keep confirmation of these changes for your records.
Additional Assets
You might also need to transfer other assets into your trust, such as business interests, royalties, trademarks, digital assets, college savings plans, and health savings accounts. Each type of asset has unique considerations, so let us guide you through the process.
Funding your trust can seem complex, but you don’t have to navigate it alone. We’re here to help you ensure everything is properly coordinated so that when the time comes, your successor trustee can take over smoothly.
At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.
To learn more about our one-of-a-kind systems and services, contact us or schedule a no-obligation 15-minute introductory phone call today.