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10 Things You Should Know about Funding a Revocable Living Trust 

Law Office of Jonathan D. Alexander, Esq.

Most of my clients create living trust centered estate plans. Living trusts have several advantages over will-centered estate plans. Drafting the living trust; however, is just the first step. Properly funding your trust is critical to ensure that you are prepared for the future.

An error in the funding process could result in your assets going through probate, a process most of my clients wish to avoid due to its public nature and the expense. It is important to note that every situation is unique. I always recommend that you schedule a consultation with me to discuss your specific facts.

You should also consider that your living trust and estate plan should be periodically revised. Over the years, your life changes. Your living trust should be updated accordingly. A living trust is not a static document. It should be amended to account for major life events and changes in the law.

1. What Happens When You Fund a Living Trust?

The process of funding a trust involves transferring ownership of your assets from you to your trust. Transferring an asset into the trust may depend on the asset type. For example, you may need to name the trust as a beneficiary rather than simply transferring the title of ownership.

Once you finish setting up and funding your trust, the assets inside it are now your held by trustees in a fiduciary capacity for the benefit of the living trust’s beneficiaries. As the initial trustee, you may manage your assets in a way you consider appropriate.

2. Why Fund Your Trust?

If you do not properly transfer your assets to your trust, your heirs will likely end up in probate court. A living trust is drafted, in large part, to avoid probate. Failure to fund undermines the living trust’s primary purpose.

When you fail to fund, you are also not giving your trustee any power to manage your assets. If you become incapacitated or die, your trustee will not be able to carry out the terms of your trust without first going through probate.

Funding your living trust ensures you distribute your assets properly among your beneficiaries when you die. Any assets that are subject to probate that did not get included in the trust may end up in front of probate court judge. The judge will then determine to whom the assets are transferred.

Funding your trust is a vital part of the process, and you must not overlook it. If you complete the process, not only do you avoid probate, but you’re going to ensure your property goes where you want it to go once you die.

3. Can You Amend a Living Trust?

Absolutely, you may revise your living trust. In fact, you should review your living trust’s terms at least once every three years or as soon as you experience a major life change (having a child, marrying/divorcing, getting a new job, etc.).

You may modify or amend your living trust at any time, but you should seek help from a qualified estate planning attorney. If you want to make significant changes, it may be a better option to restate rather than merely amend your trust. Finally, you may revoke your trust if you consider it appropriate. Make sure to consult with an estate planning attorney determine the best option for you.

4. Do You Have to Fund Your Trust Yourself?

No, in fact I recommend that you consult with an estate planning attorney to assist you with your estate plan design and walk you through the funding process.

I explain to my clients exactly how to transfer each asset into their living trusts. I do offer complete funding, but most of my clients handle some of the funding themselves. In either event, your estate plan will include funding instructions for many different asset types.

5. Is Funding a Trust Difficult?

Typically, the process of funding your trust is simple enough. However, it can be time-consuming.

If you are doing the funding yourself, you will most likely have difficulty with the transfer deed process. Working with the county recorder’s office, filling out the forms properly and filing transfer deeds is laborious.

For this reason, all of my estate plan packages include at least one transfer deed (typically for the family residence). I do offer complete funding on an a la carte basis.

When clients perform their own funding, the problem that I see most often is procrastination. This can lead to significant problems in the event of untimely death or incapacity. My goal is that every client has the peace of mind that comes with knowing that your assets are protected and that they will be transferred according to your wishes in the event of your incapacity or death.

6. How Do You Transfer Assets Without Titles, e.g. Personal Effects?

Tangible personal includes clothing, artwork, picture, collectibles, jewelry, books, watches, household furnishings, sporting goods, and hobby paraphernalia. My clients’ estate plans always include a declaration that tangible personal property has been transferred to their living trust in the initial section of the document.

7. How Do You Fund Real Estate?

Due to the complexity of properly transferring real estate into a living trust, I recommend that you hire a qualified estate planning attorney to assist you.

8. How Do You Fund Cash Accounts or Business Interests?

Each banking institution may have different guidelines and forms for transferring your accounts into your trust. The first thing you must do is ask your bank what you need to get started. Your bank will have you fill out its forms. Your bank will also likely request a “Certificate of Trust” to verify the existence and authenticity of your trust.

As for transferring business interests into your trust, there are several options. Business interests include partnerships, corporations, LLCs, and more. I recommend that you consult with an estate planning attorney to properly transfer your business to your living trust.

9. How Do You Fund Retirement and Life Insurance policies?

In general, you should never transfer ownership of a qualified retirement or pension plan or individual retirement account to your living trust. You should also ensure that your primary and contingent beneficiary designations are up to date and accurate.

There are several instances when you may want to name your living trust as a beneficiary of your life insurance policy, but you should consult with an estate planning attorney to confirm proper designation and funding.

10. Are There Any Assets You Should Not Include in Your Trust?

In general, retitling retirement account plans into a living trust is not recommended due to potential adverse tax consequences.

Transferring cars or motor vehicles is also generally not recommended. While you can easily change the title of ownership for these assets, doing so can require you to pay additional taxes or transfer fees.

Funding your living trust is critical to your estate plan’s success. With a properly funded living trust you will avoiding probate, maintain your privacy, segregate your assets, control guardianship, minimize estate taxes, and ensure that your assets and transferred to your loved ones in accordance with your wishes. With a living trust you can amend or restate the terms at any point during your lifetime. Proper funding requires a little organizing and some planning.

The best way to protect your legacy is establish a comprehensive estate plan and make sure it is properly funded. To learn more, contact my office today for a free consultation.

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The pandemic had me thinking very seriously about my outdated Will, I contacted the Law Office of Jonathan D. Alexander and he quickly eased my mind about all of the details of my estate and outdated will. He handled every detail from end to end and I was able to complete my Living Trust with no...

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I am so grateful to have been able to work with Jonathan. I knew I wanted to have a Living Trust and I had no idea what to expect going into the process. Jonathan was easy to talk to and explained the process thoroughly of what was required. He was patient with my multiple questions and replied in a...

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