Regarding estate planning, one of the most essential tools available to individuals is a trust. Think of a trust as a box with an instruction manual. The instruction manual controls what’s in the box and where it goes at the time of your passing. But here’s the catch – if nothing is in the box, the instruction manual is pretty useless. So, how do you get your assets like real estate, brokerage accounts, and business interests into your trust? The answer lies in a process known as funding.
What is Funding?
Funding a trust is a crucial step in the estate planning process. It involves transferring assets from your name to the name of your trust, thereby ensuring that the terms of the trust agreement govern them. Various methods for funding a trust during your lifetime exist, including retitling assets and designating the trust as a beneficiary on specific accounts.
How Do I Fund My Trust?
Retitling is commonly used to place assets into a trust during your lifetime. Let’s take the example of a house. If I own a home, the deed may say that Daniel Miller is the owner. That’s not in the box. Instead, I would need to create a new deed. The deed would say from Daniel Miller to Daniel Miller as trustee of the Daniel Miller Living Trust. By doing this, the trust is effectively funded with the house as one of its assets.
The same goes for brokerage accounts and non-retirement bank accounts. My bank and brokerage statements will change from Daniel Miller to Daniel Miller as Trustee of the Daniel Miller Living Trust. I need to go to each brokerage and bank to let them know that I created a trust and would like to place my accounts into it. They will then work to put the accounts into the box/trust.
In addition to retitling assets during your lifetime, you can fund the trust after your passing by designating it as the beneficiary of specific accounts. This is commonly done with retirement accounts, life insurance policies, and certain financial investments. Completing a beneficiary form and naming the trust as the beneficiary ensures that the assets held in these accounts will be transferred to the trust upon your death.
Why Funding Is Important
Funding a trust may seem complex and time-consuming, especially considering the need to update various legal documents and financial accounts. However, it is an essential aspect of estate planning that should not be overlooked. Adequately funding your trust ensures that your assets are aligned with your overall estate plan and will be distributed according to your wishes.
It’s important to note that funding a trust requires proactive effort. You must work with legal and financial professionals to ensure the appropriate steps are taken to transfer your assets into the trust. This may involve legal documentation, account updates, and ongoing communication with relevant institutions.
Funding a trust is a critical component of estate planning. By retitling assets and designating the trust as a beneficiary, you can ensure that your assets are properly managed and distributed according to your wishes. This proactive and forward-thinking approach to estate planning can provide peace of mind for you and your loved ones.
We’re Here To Help
Creating a trust is only the first step. By funding the trust with your assets, you can ensure its effectiveness in managing and distributing your estate. Take the time to consider the assets that should be transferred to your trust, and work with professionals to ensure that the funding process is completed accurately and efficiently. Your proactive approach to funding your trust can significantly impact the success of your overall estate plan.
Contact us today for a comprehensive consultation, and mention this article for a focused discussion on your needs.
This article is a service of Miller & Miller Law Group. We do not just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love.