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Estate Planning

A Step-by-Step Guide To Funding Your Trust

Creating a trust is a crucial step in estate planning, ensuring that your assets are managed and distributed according to your wishes. However, more than establishing a trust is required; you must also fund it. Funding a trust involves transferring assets into the trust, making them subject to the terms and management outlined in the trust document. Without funding, your trust remains an empty shell, unable to fulfill its intended purpose. This blog will walk you through the process of funding a trust, covering various asset types and providing practical tips to ensure that your trust is correctly set up to protect your legacy.

Why Funding a Trust is Essential

Before diving into the how-to, it’s essential to understand why funding a trust is so critical. When you fund a trust, you transfer ownership of your assets from your name into the name of the trust. This process has several key benefits:

  • Avoidance of Probate: One of the primary advantages of a trust is that assets placed in a trust typically avoid the probate process, which can be lengthy, costly, and public. By funding your trust, you ensure that your beneficiaries can receive their inheritance more quickly and with fewer legal hurdles.
  • Control Over Distribution: A trust empowers you to dictate exactly how and when your assets are distributed to your beneficiaries. Whether you want to provide for minor children, protect a loved one with special needs, or stagger distributions over time, funding your trust gives you the control to do so.
  • Protection from Creditors: In many cases, assets in a properly funded trust may be shielded from creditors, lawsuits, or divorce settlements, providing a robust layer of security for your estate.

Step 1: Identify the Assets to Transfer

The first step in funding a trust is to identify the assets you wish to transfer into the trust. These assets can include:

  • Real Estate is often one of the most valuable assets people transfer into a trust. It includes your primary residence, vacation homes, rental properties, and any other real property you own.
  • Bank Accounts: Checking, savings, and money market accounts can all be transferred into a trust. However, some funds should be kept in personal accounts for day-to-day expenses.
  • Investment Accounts: Stocks, bonds, mutual funds, and other investment accounts are commonly transferred into a trust. This ensures that these assets are managed according to your wishes after your death.
  • Retirement Accounts: While retirement accounts like IRAs and 401(k)s are not typically transferred into a trust due to tax implications, you can name the trust as a beneficiary, ensuring the assets are managed according to your trust’s terms upon your death.
  • Life Insurance Policies: You can transfer a life insurance policy ownership to your trust or name the trust as the beneficiary. This ensures that the proceeds are distributed according to your estate plan.
  • Personal Property: Valuable personal property, such as jewelry, artwork, and antiques, can also be transferred into a trust. This requires careful documentation to ensure the transfer is recognized.
  • Business Interests: If you own a business, you can transfer your ownership interest into the trust. This can be complex and require amending operating or shareholder agreements, so consult with a professional.

Step 2: Re-title Your Assets

Once you’ve identified the assets to transfer, the next step is to retitle them in the trust’s name. The specific process varies depending on the asset type.

1. Real Estate

To transfer real estate into a trust, you’ll need to execute a new deed that transfers ownership from your name to you as trustee of your trust. This deed must be recorded with the appropriate county recorder’s office. It’s often best to work with an attorney to ensure the deed is drafted correctly and recorded.

2. Bank and Investment Accounts

For bank and investment accounts, you’ll need to contact the financial institutions holding the accounts. They will require you to complete paperwork to change the account ownership to the name of the trust (you as trustee). Be prepared to provide a copy of the trust document or a Certification of Trust.

3. Personal Property

Personal property can be transferred into a trust through a bill of sale or an assignment of property, depending on the item. For items with titles, like vehicles, you’ll need to re-title the car in the name of the trust at your local Department of Motor Vehicles (DMV). Other personal property may be transferred via a Personal Property Memorandum.

4. Business Interests

Transferring business interests to a trust requires reviewing and possibly amending the business’s operating or shareholder agreement. You’ll then execute an assignment of ownership interest to the trust.

Step 3: Designate Beneficiaries

In cases where transferring the asset into the trust is not advisable or feasible—such as with retirement accounts or certain life insurance policies—you can name the trust as the beneficiary. This ensures that the asset will be transferred to the trust and managed according to the trust’s terms upon your death.

You may designate the trust as a primary or contingent beneficiary for retirement accounts. Be aware that naming a trust as the beneficiary of a retirement account can have significant tax implications, so it’s essential to consult with a tax advisor or estate planning attorney.

Step 4: Update Beneficiary Designations

If you have other assets with beneficiary designations—such as life insurance policies, annuities, or payable-on-death (POD) accounts—you may want to update these to name the trust as the beneficiary. This ensures that these assets are managed according to your trust’s terms and are not subject to the probate process.

Step 5: Review and Update Your Trust Regularly

Funding your trust is not a one-time event. As your financial situation changes, you acquire new assets, or your estate planning goals evolve, you must update your trust and ensure that all relevant assets are appropriately titled in the trust’s name. Regular reviews with your estate planning attorney can provide you with the reassurance that your trust is always up to date.

Step 6: Consult with Professionals

Funding a trust can be a complex process, and it’s crucial to get it right to ensure your estate plan functions as intended. Working with professionals—such as an estate planning attorney, financial advisor, and tax professional—can provide the expertise needed to navigate the process smoothly.

We’re Here To Ensure a Smooth Transition

Funding a trust is critical in ensuring that your estate plan is fully operational and capable of achieving your long-term goals. By carefully selecting assets, re-titling them into the trust, and regularly reviewing your estate plan, you can ensure that your legacy is protected and your loved ones are provided for according to your wishes. While the process can seem daunting, taking it step by step and seeking professional guidance can make it manageable and ultimately rewarding. Contact us today to get started.

This article is a service of August Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. 

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Categories
Estate Planning

Missing Assets: Why Estate Planning is More Than Just Documents

Did you know your assets could become “unclaimed property” and be turned over to the government? It happens more than you think! State governments across America currently hold a staggering $60 billion in forgotten and abandoned assets. And this isn’t just spare change we’re talking about. These are life insurance policies, forgotten bank accounts, uncashed checks, retirement funds, and other valuable assets that have lost their connection to their rightful owners.

I regularly see the consequences of overlooked assets and inadequate estate planning. Let’s explore how assets are lost and become “unclaimed,” how to prevent your assets from ending up in this $60 billion pool, and, most importantly, how to ensure your hard-earned assets reach your loved ones the way you want.

How Assets Become “Lost”

You might wonder how billions of dollars in assets could go missing. The truth is, it happens more easily than you’d think. Think about this: you become incapacitated or die, and someone in your family (either someone you named legally or someone chosen by a judge) has the job of finding all of your assets. Would they be able to find everything? How easy would it be for you to find everything, and you know what you earned, the accounts you set up, when you worked for that one company that set up a retirement account for you, got that insurance policy, etc. 

 What we see commonly when someone passes away without an updated estate plan (including a comprehensive asset inventory), is that their loved ones often have no idea what assets exist or where to find them. Those assets could eventually end up in state custody instead of going to the people you love. That money could be used to fund your children’s education, an investment in a loved one’s business, or to enhance the lives of the people you love most.

“Traditional” or “old school” estate planning often contributes to the problem. With an estate plan drafted by a financial advisor or lawyer who sells a will or trust rather than a comprehensive plan (or from a DIY tool like cheap legal or AI), you typically receive a set of documents to review and sign. You might take these documents home, put them on a shelf or in a drawer, and never look at them again. There’s usually no inventory of your assets, which means that some of your assets could be lost or overlooked and end up part of that $60 billion in unclaimed property. 

Why an Asset Inventory and Regular Review is Crucial

I know that effective estate planning isn’t a one-time event – it’s a lifelong process that includes an inventory of what you have, regular updates to your inventory, and the legal documents that go along with it. My process begins with a Life & Legacy Planning® Session, where you’ll create an inventory of your assets, ensuring nothing gets overlooked or forgotten. This inventory includes not just the obvious assets like your home and bank accounts but also:

  • Life insurance policies
  • Retirement accounts from all previous employers
  • Investment accounts
  • Business interests
  • Valuable personal property
  • Intellectual property rights
  • Digital assets and cryptocurrency

Digital assets present a particular challenge in today’s world. Cryptocurrency, online banking accounts, social media profiles, and digital business assets can be especially difficult for loved ones to track down and access without proper planning. Many people don’t realize that without proper documentation and access instructions, their digital assets could become effectively lost forever, even if their family and friends know they exist.

I’ll also help you keep your inventory updated when you work with me. I regularly review your Life & Legacy Plan to ensure your asset inventory stays current and properly aligns with your goals, wishes, and values. This comprehensive approach helps prevent your assets from becoming lost so they can go to the people you want in the way you want.

Beyond the Financial Impact

While creating an asset inventory is crucial, my Life & Legacy Planning process goes several steps further. It’s not enough to simply list what you own – you need to ensure these assets are properly titled, beneficiary designations are up to date, and your loved ones know how to access everything when the time comes. I support you with it all. I will also be there for your loved ones when you no longer can.

In addition, there’s another crucial part of planning that’s often omitted from traditional or DIY planning. It’s the realization that the value of many assets isn’t financial. Family photographs stored in the cloud, emails containing important family history, and digital collections of music or art can have tremendous sentimental value. Yet without proper planning, these too can become effectively “unclaimed property” – inaccessible to the very people meant to inherit them. When these invaluable family legacies are lost, they become another kind of unclaimed property, though their value can’t be measured in dollars.

Remember, proper estate planning isn’t just about having the correct documents – it’s about taking all the steps needed to make things as easy as possible for your loved ones. It’s the greatest act of love you can give to the people you cherish most.

Your Next Step

I can help you create a comprehensive Life & Legacy Plan that includes a complete asset inventory, regular reviews, and updates to ensure nothing gets lost or forgotten. I’ll also help you create a Life & Legacy Interview so your most valuable assets – your values, traditions, and love – get passed on to the people you love most. Let’s work together to protect your legacy.

Schedule a complimentary 15-minute consultation and learn more about how I can help.

Contact us today to get started.

This article is a service of August Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. 

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

The August Law PLLC team will work hard to deliver good quality information upon subscription. However, if you decide that you no longer want to receive emails from us, feel free to click the "unsubscribe" button at the bottom of the email received.

The August Law PLLC team will work hard to deliver good quality information upon subscription. However, if you decide that you no longer want to receive emails from us, feel free to click the "unsubscribe" button at the bottom of the email received.