Funding Your Trust

Signing your trust is just the first step in creating a successful estate plan. The second step is funding your trust. This is the process of transferring assets into it. In this article, we will go over the basic steps of funding your trust.

Personal Property

Personal property includes clothing, furniture, jewelry, and electronics. These assets do not have any formal title, but you will want to sign a general transfer document to add your personal property to the trust. This should be provided as part of your estate planning documents.

Bank and Financial Accounts

Each financial institution will have its own process for transferring your accounts into your trust. So you will want to contact your bank to see what they require to complete the transfer. Typically, this will require the completion of a form and providing them with copies of the trust.

Real Estate

You will need to sign a deed to place real estate into your trust. This is usually done by means of a Quit Claim Deed or Trust Transfer Deed. Which type you use will depend on the state you live in. To be valid, the deed must be filed with the County Recorder. As a note, if you refinance your home, your lender may ask you to take your home out of the trust. You will need to make sure the deed is placed back into the trust once the refinance is complete.

Business Interests

What steps you need to take will depend on the type of business you have. For partnerships and LLCs, you will need to sign an Assignment of Interest. This is a document that states you are transferring your interest in the business into the trust. You will also want to update your LLC documents to show the trust as the new owner.

If you have an interest in a corporation, you will need to update the business’s ownership records and issue new stock certificates. In some cases, you may also need to sign an Assignment of Stock.

Lastly, is a sole proprietorship. Since this business does not create a separate legal entity, you will want to transfer business bank accounts and assets directly to the trust.

Life Insurance

You will not transfer the ownership of a life insurance policy into the trust. Rather, you can update the policy beneficiary to be the trust. Or if you prefer, you can designate individual beneficiaries to be paid directly. Either way will avoid probate.

Retirement Accounts

You will not want to transfer ownership in retirement accounts into the trust because it will have negative tax consequences. What you should do instead, is make sure the beneficiaries on your accounts are up to date. If you are thinking about making your trust a beneficiary, you should consult with your tax professional first.

Upkeep

After initially funding your trust, you will want to keep up with funding as you get new assets. For example, if you purchase a new home, you will want to title it into the trust. Similarly, you should open new banking and financial accounts directly into the trust. By doing so you will ensure you are keeping assets out of probate.

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