Funding Your Trust
A living trust is an important estate planning tool designed to avoid time-consuming and expensive court entanglement when you die (probate) or become incapacitated (guardianship or conservatorship). Creating a trust, however, is only half the battle. You still need to fund it with your assets. Your trust only controls assets that it owns. And assets that it doesn’t own must generally be probated.
So how do you transfer assets to your trust? The answer depends largely on the type of asset.
Most personal property, such as furniture, electronics, clothing, and jewelry, doesn’t have a formal title. Consequently, it can be transferred to your trust simply by declaring it so. This is usually accomplished by executing a simple assignment or written statement declaring that the trust now owns these items.
Other assets may require proof of ownership, such as bank accounts, real estate, automobiles, life insurance policies, and investment accounts. Transferring these assets to your trust typically requires a formal document filed either in the public records or with a third party. For example, a bank account can usually only be transferred to your trust by signing the bank’s internal transfer forms, and real estate can only be transferred by signing and recording a deed. Otherwise, the trust won’t own these assets.
Furthermore, even after your trust is created and initially funded, you still need to continue funding it with newly acquired assets. For instance, if a bank account is opened in the future, open it in the name of the trust. If a new home is purchased in the future, purchase it in the name of the trust. Being careful to take simple steps such as these helps to ensure that your trust will always be fully funded. And doing it right with your attorney’s assistance will save you and your loved ones lots of time, money, and headaches in the long run.