Trust Funding: What Is It and Why Do I Need To Do It?

At Naimish & Lewis, we understand that establishing a trust is just the beginning. To ensure its effectiveness, you must embark on the critical journey of trust funding. The failure to properly fund a trust often has adverse consequences that are preventable. We assist our clients with trust funding as part of our full-service approach to each client’s estate plan.

I signed my trust, now what? Why Trust Funding is Vital

Signing your Revocable Living Trust isn’t the final step in establishing a properly functioning trust. After you create and sign your trust, you must then “fund” your trust with your assets. “Funding” your trust is the process of transferring all of your assets from you to your trust by either changing title to the trustee or assigning the asset to the trustee.

Proper trust funding bestows you with unparalleled control. It allows you to bypass probate, maintain privacy regarding your assets, and streamline provisions for your family. However, procrastination in funding is a common pitfall. If you pass away before funding, court intervention might be necessary, negating the very purpose of establishing the trust.

However, many people make the mistake of procrastinating when it comes to funding their trust. If they die before the trust is funded, court intervention may be required to set things right, defeating many of the reasons for establishing their trust in the first place.

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 deal with Probate Court. 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 in order to avoid probate or avoid disclosure of your private information.

Who is responsible for funding my trust?

Your attorney should 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, 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 will typically 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.

Understanding Trustable Assets

Ideally, all your assets should find their home within the trust, streamlining control. However, some assets, due to their nature, might not align with this structure. Typical assets earmarked for the trust include real property, bank accounts, investments, and business interests. Others, like individual retirement accounts, must be held by an individual but can still designate the trust as a beneficiary.

Transferring assets to your trust is usually straightforward but can be time-consuming. Many institutions are well-versed in this process, often facilitating transfers via phone calls and letters. Some may require proof of the trust’s existence, which your attorney can furnish through a “Certification of Trust.”

For assets causing uncertainty, seek guidance from your estate planning attorney and consult with your tax advisor to address any potential tax implications.

Keeping Your Trust Funded: A Continuous Journey

Funding your trust doesn’t end once the process is complete. As you acquire new assets, ensure they find their place within your trust. If immediate titling isn’t feasible, make it a priority to transfer them at the earliest opportunity.

Navigating the intricacies of trust funding is best undertaken with experienced professionals by your side. The estate planning team at Naimish & Lewis is poised to provide the guidance you need. Don’t let procrastination hinder the effectiveness of your trust. Reach out today for a consultation and embark on a path to a secure and streamlined estate plan.

Remember, the trust you fund today secures tomorrow’s legacy.