When creating a Living Trust as part of an estate plan, it’s crucial to understand the process of funding a Living Trust. Funding the trust means formally transferring ownership of assets from an individual’s name to the name of the trust. This step is essential for ensuring that the assets are managed according to the trust’s terms and helps avoid probate.
Why Funding Your Trust is Important
Most assets are transferable at death to beneficiaries. However, large assets like properties are not, and “funding” properties should be your utmost priority. Other assets are not a priority.
Types of Assets to Fund in a Living Trust
- Real Estate (Priority)
- Primary Residences: The deed SHOULD be transferred into the trust’s name.
- Vacation Homes: Transfer ownership to the trust to ensure smooth management and transfer.
- Investment Properties: Rental properties or commercial properties should also be funded into the trust. Check with the mortgage company for any specific requirements.
- Financial Accounts
- Bank Accounts: Savings, checking, and money market accounts could be retitled in the trust’s name. This allows the trustee to manage these accounts if you become incapacitated and avoids probate. Joint accounts can accomplish the same goal. Speak with your bank representative for assistance.
- Certificates of Deposit (CDs): Retitling CDs in the name of the trust can be done but check with the bank for any penalties. Speak with your bank representative for assistance.
- Brokerage Accounts: Stocks, bonds, mutual funds, and other securities in brokerage accounts could be transferred to the trust, especially if there are concerns about wealth transfer. Speak with a Fiduciary Investment Advisor for assistance.
- Business Interests
- Ownership in a Business: Interests in LLCs, partnerships, or corporations could be transferred to the trust, often requiring updated operating agreements or share certificates. Speak with an Attorney for assistance.
- Privately Held Shares: These could be reissued in the name of the trust. Speak with your investment custodian.
- Life Insurance Policies
- Policies with Significant Cash Value: Although not recommended, if there is a good estate planning reason, the trust can be named as the owner and/or beneficiary of life insurance policies. Speak with a Life Insurance agent for assistance.
- Personal Property
- Valuable Personal Items: High-value items like jewelry, artwork, and collectibles should be listed in a personal property memorandum associated with the trust or transferred directly. Speak with an Attorney for assistance.
- Vehicles: Cars, boats, and RVs can be retitled in the name of the trust. This can help avoid probate, though in some states, it may not be necessary. Speak with an Attorney for assistance.
- Investment Properties
- Real Estate Investments: These should be transferred into the trust to ensure they are managed according to the trust’s terms and bypass probate.
- Stocks and Bonds
- Individual Securities: If not held in a brokerage account, individual stocks and bonds should be retitled into the trust’s name.
- Precious Metals
- Gold, Silver, and Other Metals: These can be physically transferred to the trust or listed as trust property.
- Intellectual Property
- Copyrights, Patents, and Trademarks: Ownership of these assets should be transferred to the trust.
- Promissory Notes
- Loans Owed to You: Transfer the ownership of promissory notes into the trust so that the payments can be managed by the trustee.
Assets Often Not Funded Directly into the Trust
- Retirement Accounts (IRAs, 401(k)s): These typically remain in your name, but you can name the trust as the beneficiary.
- Life Insurance Policies (without significant cash value): In many cases, these are not transferred directly but can name the trust as the Primary or Contingent beneficiary.
