Creating a revocable trust is an important step in estate planning. However, many people overlook an essential step: funding the trust. Without proper funding, a trust is empty and cannot serve its purpose. Here’s why funding your trust is important and how to do it correctly.
What Does It Mean to Fund a Trust?
Funding a trust means transferring ownership of your assets from your name to the trust’s name. This includes real estate, bank accounts, investments, and valuable personal property. If assets are not properly titled in the trust’s name, they may still go through probate, which can be time-consuming and costly.
Steps to Fund Your Revocable Trust
Real Estate: To transfer real property into your trust, you must create and record a new deed listing the trust as the owner. I help my clients with this essential step as long as the real estate is located in California.
Bank Accounts: Visit your bank in person or online to retitle accounts in the name of your trust or update beneficiary designations to the trust.
Investment Accounts: Work with your financial advisor to retitle brokerage accounts or update beneficiary designations to the trust.
Personal Property: Transfer valuable items, like jewelry, art, and collectibles, by creating an assignment of personal property document.
Business Interests: If you own a business, update ownership documents to reflect the trust as the owner.
Retirement Accounts and Life Insurance: While these assets are often left to individuals through beneficiary designations, you may want to name the trust as a contingent beneficiary.
Homeowners Insurance: Contact your insurance provider to add the trust as an additional insured on your policy. This protects the property and ensures there are no coverage gaps.
Common Mistakes to Avoid
Delaying the Process: Some people establish a trust but fail to fund it, leaving assets unprotected if something unexpected happens.
Incomplete Transfers: Some assets require additional paperwork or approvals. Ensure all necessary forms are completed.
Forgetting New Assets: As you acquire new assets, remember to title them in the trust’s name.
Action Items:
List all assets and determine which need to be transferred.
Contact financial institutions to update account titles.
Ask your insurance provider to add the trust as an additional insured to your policy.
Review and update your estate plan as your assets change.
By taking these steps, you can ensure a smooth and efficient transition of your estate to your beneficiaries. Please contact me with any questions. About the Author
Kendra Hampton has nearly 20 years of legal experience. She manages her own estate planning practice and has helped hundreds of clients create and update their trust, will, and powers of attorney. Kendra is committed to educating clients on the importance of estate planning and crafting personalized planning strategies.
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