Trust Funding: What is it and why do I need to do it?

However, many people make the mistake of procrastinating when it comes to funding their trust, requiring court intervention after they pass away in order to set things right, and defeating many of the reasons for establishing their trust.

What if I don’t fund my trust?

Your trust controls only the assets that you place within the trust. If you established your Revocable Living Trust and neglect to fund your trust, then you may be required to enlist the probate court to help fix it or potentially require a formal probate. The trust you worked so hard on to establish exactly how your assets should be handled may be perfect, but without changing titles and beneficiary designations, court intervention will be necessary to establish trust control over your assets. This can defeat the purpose of having a trust which avoids probate and disclosure of your private information.

Who is responsible for funding my trust?

Your attorney generally will assist you to prepare an assignment for property that doesn’t have a title, and a “pour-over will” along with your trust to act as a safety net. After you die, the will can designate your trust to control any assets that weren’t accounted for previously. Depending on the asset, or the total value of assets outside your trust, probate may still be required, but your trust will be able to maintain control over the distribution.

Typically, your attorney will assist you in some aspects of funding your trust. Many attorneys provide assistance in transferring your real estate but generally provide instructions on dealing with other assets to save on legal fees. The purpose of the trust is to control your assets and you are ultimately responsible for making sure that the assets you want in your trust have been properly placed within your trust. You should review your assets with your attorney and discuss who will be responsible for transferring each asset. Your attorney can provide you instructions and procedures for assets you decide to transfer on your own.

What assets should be in my trust and how difficult are they to transfer?

Basically, the idea is that most of your assets go into your trust and are therefore all under the control of one document, all neat and tidy. However, there are assets that you may want to leave out or that you are not able to place in your trust. Which assets to transfer to your trust and which to leave out should be a discussion with your attorney. Typical assets that you want to transfer to your trust include your real property, bank accounts, investments, and business interests.

In most cases, transferring assets into your trust should be fairly easy, though it will likely be time consuming. Nowadays, living trusts are more and more common, and many institutions are ready and able to assist you in transferring your assets. Some transfers may even be handled simply through phone calls and email. For some assets, an institution such as a bank may require proof that you have an existing trust. Your attorney should prepare what is called a “certification of trust” for you to provide to any institution that requires proof. A certification of trust is a short version of your trust verifying the existence of the trust as well as some basic information such as the trustees and their powers.

The list of potential different kinds of assets is extensive. If you are not sure if you should transfer an asset into your trust ask your attorney to help determine its proper placement. You should also consult your tax advisor or attorney to determine what, if any, tax implications might be involved in transferring assets to your trust.

Once you have completed your trust funding, don’t forget about it in the future! In many cases, when you acquire new assets, you can take title as trustee of your trustee immediately. If not, make sure to transfer title to your trust right away. If you need help funding your trust, contact your estate plan attorney for instructions.