Securing Your Legacy: Properly Funding Your Trust

Properly funding your trust is crucial to ensuring your legacy is protected and distributed according to your wishes. Many people think that by simply creating a trust, their assets are protected. However, funding your trust involves transferring your assets into the trust to ensure they are titled in the name of the trust or that the trust is identified as the payable on death beneficiary. Failing to properly fund your trust can have costly consequences. However, following these tips can help you have confidence your legacy is protected and your are achieving your estate planning goals.

The Costly Consequences of Improperly Funding Your Trust

One of the main reasons people create a trust is to avoid a probate administration. Improperly funding your trust can mean that your assets will have to pass through a probate estate, even if you have a “pour-over” will directing all assets to your trust. This can be time-consuming, costly, and may result in your assets being distributed in a way that does not align with your wishes. Furthermore, trusts provide protection by keeping your assets out of your personal name, guarding against creditor claims, lawsuits, and other legal action. Any assets left outside of your trust will be exposed to potential creditor claims. Ultimately, failing to properly fund your trust can result in an incomplete estate plan. The whole purpose for creating a trust is to ensure that your assets are managed and distributed according to your wishes. Without properly funding your trust, your estate planning goals and needs will be unmet.

Steps to Properly Fund Your Trust

Funding your trust means transferring ownership of assets from your personal name into the name of your trust. A trust is essentially a separate legal entity that can own property and assets. Proper trust funding requires following the following steps to ensure all of your assets are  held in a way that will achieve your estate planning goals:

1. Create a List of All of Your Assets

The first step in funding your trust is to create a complete and exhaustive list of all of your assets. This includes real estate, bank accounts (including safety deposit boxes), retirement accounts, stocks and bonds, and vehicles. The funding process will be slightly different depending on the type of trust you’ve created and the type of asset you’re transferring. But knowing what assets you have will help you determine the next steps. You’ll want to update this list as you acquire new assets so that your trustee has an accurate picture of what is included in your trust.

2. Review Ownership and Beneficiary Designations

Certain assets cannot be held directly by the trust, such as retirement accounts or life insurance policies. For these assets, check the ownership and beneficiary designations of each to ensure they are consistent with your wishes. If any assets have beneficiary designations, make sure they are updated to reflect the trust as the beneficiary.

You will also want to file a transfer on death designation with your state BMV to ensure your vehicles transfer into the trust at your death.

3. Transfer Ownership of Assets

Transfer ownership of the asset to the the trust according to the needs for each asset. For example, real property will require a deed transfer be recorded with your county’s recorder’s office. Bank accounts, when you’re putting them into the trust and not simply naming the trust as beneficiary, will require a change of ownership form that is typically provided by the bank.

4. Re-Title Real Property to Reflect Ownership by the Trust

Any real property you own will need to be retitled to reflect ownership by the trust. You will need to sign and record with your county recorders office a deed that transfers ownership of the property to the trust. Upon transfer of ownership, the property insurance company should be requested to add the trust as an additional insured to avoid any issues should a claim arise.

5. Review Your Attorney’s Instructions

Finally, be sure to review trust funding and probate avoidance instructions that your estate planning attorney provided when reviewing your trust documents. In many cases, they will provide specific instructions that will help you meet your unique estate planning goals. Your attorney should provide a fully executed Certification of Trust (or Memorandum of Trust), which may also be on file with your county recorder’s office. You will want to take this Certification with you anytime you visit a bank or title office to update the ownership/beneficiary of your assets.

And most importantly, should you have any questions as you move through the funding process, always be sure to consult with your attorney to make sure what you’re doing is aligned with the estate plan you have worked together to design.

It’s important to fund your trust properly because it allows you to achieve the goals you set forth when creating the trust. It’s also important to periodically review your trust to ensure that it remains properly funded and reflects your current wishes. At Pierce Legal, we get to know each of our clients, gaining a meaningful understanding and relationship with you that allows us to create a thorough estate planning strategy, including guidance on properly funding your trust, that will satisfy all of your planning goals and needs. Contact us today to schedule a consultation at (330) 588-6115.

Related Articles

The Costly Pitfalls of Not Hiring an Estate Planning Attorney
Beyond Wills: The Importance of Having a Complete Estate Plan
When to Update Your Estate Plan: 5 Common Life Events