What is Trust Funding?

Trust based planning is appropriate estate planning for most people.  And, trust funding is necessary to make your plan work and avoid probate.  “Trust funding” is the legal process of transferring title of your assets from your name into the name of your trust.  Your trust is like an empty water bucket that you must fill up with water.  You will fill your trust up with your assets.  This is trust funding.

How do I fund my trust?

Your estate planning attorney will help you by generating the necessary documents to make the transfers.  Your insurance professional, bank, and financial advisor will also be involved.  You just need to sign the authorizations, giving the okay to trust funding. 

Which of my assets are funded into my trust?

Most of your assets are funded into your trust.  Your house, bank account, whole life insurance policies, and investment accounts are all funded.  Some states allow funding of your car.  The beneficiary of your retirement accounts and insurance policies will be changed to the name of your trust.  Even your personal property such as your roller skates and record player are funded into your trust.

What will the title of my assets look like after trust funding?

After funding the assets will include your name, the term “living trust,” and the date you executed your trust.  For example, The Mary L. Smith Living Trust, dated July 5, 1999.

Why should I fund my trust?

Assets in your trust avoid probate and allow your trustees to manage them.  Avoiding probate saves your family time and money and keeps your private financial affairs private.  Moreover, your trustees only have authority over trust assets.  Therefore, it is important to have an up to date financial power of attorney in place to deal with assets that cannot be funded such as a car or retirement account.  Typically, term life insurance policies are not funded because they have no cash value so a power of attorney is needed to manage them. 

If you have questions about trust funding, consult with a qualified estate planning attorney.