Creating a living trust is only the first step to securing your future and the future of your loved ones. Once the trust has been established, the next step is to fund the trust. What does that mean, exactly? It simply means transferring assets into the name of the trust so you can enjoy the protections and other benefits provided by a trust. How you go about funding your trust depends on the type of property you have chosen to include. For instance, funding a trust with out of state property requires a different process than the property you own in the state where you reside.
What does “funding” a trust involve?
After the trust document has been executed, it is time to fund (or transfer) your assets into the trust account. There are basically three different ways to accomplish this, depending on the type of property. They include: changing the title or ownership in the property to the name of the trust, assigning ownership rights to the trust, or making the trust the beneficiary of the property.
Transferring real property to a trust
When real property (or real estate) is involved, you can transfer it to the trust through either a warranty deed or a quitclaim deed. The difference is, a warranty deed provides a guarantee that the seller has clear title to the property being sold. This means there are no liens or encumbrances on the property. The seller also guarantees that he or she will defend your title, and possession of, the property, if ever required. If you use a warranty deed when transferring your property to a trust, the chain of title to that property will remain intact.
Every state has its own laws governing the conveyance of real property, including the funding of real property to a living trust. Similarly, banks and title insurance companies also have certain rules and requirements that apply to the transfer of real property. These different rules may have an effect on your transfer, so consult with your estate planning attorney to make sure all of the applicable rules have been followed.
What about including out of state property in my trust?
Many people nowadays own property in more than one location, including in states other than the state in which they reside. When you are funding your living trust, it is a good idea to include the real property you own out of state, as well. Otherwise, probate proceedings will be necessary in each state where you own real property. This can be very expensive and very time consuming for those you leave behind. However, if all of your property, even the real property located elsewhere, is owned by the living trust, probate will not be required.
Will my trust be recognized in other states?
Yes! Regardless of where in the United States you create your living trust, if it was created properly in the state where it was created, it will be recognized in all 50 states. Not only is your trust considered legal in every state, but you have the right to name an out of state trustee, as well, if you choose.
If you have questions regarding trusts and out of state property, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online or by calling us at (470) 443-0062.