How to Fund a Living Trust

There are many benefits to be gained from creating a living trust.  Some of these benefits include being able to protect certain property for your beneficiaries, reducing estate taxes, planning for your incapacity and avoiding will contests.  Drafting the terms of a living trust is just the first step to protecting assets as part of a comprehensive estate plan.  A living trust must actually be funded with assets.  Many people overlook the fact that you must fund a living trust, which means transferring your assets and property to the trust.  How a trust is funded depends on the nature of the assets to be included in the trust.  There are several options to choose from and your estate planning attorney can help you decide the method that best fits your needs.

What is meant by “Funding a Trust”?

When a trust agreement is created, signed and executed, the next step is funding, or transferring assets to the trust.  This is generally accomplished one of three ways.  You can change the title or ownership of the property, assign the ownership rights to the trust, or change the name of the beneficiary.

Changing ownership of your assets

Assets like bank accounts, investment accounts, stocks, bonds and real estate can easily be funded into the trust by changing the name of the owner to the name of your trust.  It may be as simple as changing the name on the account.  However, each financial institution may have different policies or procedures.  For instance, you may be required to close the original account and then open a new account in the name of the trust.

Assigning ownership rights to the trust

With personal property, such as personal loans, partnerships and intellectual property, which do not require a certificate of legal title, ownership in the property can be assigned to the trust.  Intellectual property rights to creative works, such as patents and copyrights, can be funded into the trust using a simple form.

Changing the names of beneficiaries

There are other types of assets, including insurance policies, retirement accounts and pension benefits, that require a named beneficiary.  These assets are not retitled into the name of a trust, but, instead, are transferred by changing the names of the beneficiaries.

What about property not included in the trust?

If you do not include certain property in your living trust, that property will need to be probated when you die.  If you do not consider this fact, when creating a living trust, your estate plan may not be as effective as you had hoped.  A trust that is not properly funded will likely not serve its intended purpose.

If you have questions regarding funding living trusts, or any other estate planning needs, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.