Trusts have gained popularity and are now used as an estate planning tool to provide added privacy and control over assets. When a living trust is properly established and administered, it can help the grantor’s estate avoid the probate process upon death or conservatorship in the event of incapacity. But in order to function properly, a trust must be suitably funded.
Funding your trust
A trust controls the assets you place into it, but a trust without any assets serves as little more than an organized pile of paperwork and offers no value to the grantor. Failing to place assets in a trust also means that they need to pass through probate, so the details of your estate will become public record and potentially subject to federal estate taxes.
It’s best to begin funding your trust immediately after you establish it. The process of funding your trust only involves a few steps; however, it can take time to transfer the ownership and update titles of your property and beneficiary designations. An attorney can help you identify which of your assets you can use to fund your trust.
Generally, the steps involved in funding a trust include:
- Changing ownership and title information from your name to the name of the trust
- Assigning ownership rights for smaller personal property, known as tangible assets
- Updating beneficiary designations to the name of the trust, checking to make the update doesn’t count as a taxable event
Ensure your trust functions as planned by taking steps to fund it
If you took steps to protect your wishes and legacy by founding a living trust, it’s important that you complete the process and take steps to fund it. Keep in mind that even after you retitle and reassign your assets and personal property to the trust that these assets still remain in your control until death or incapacitation.