The Right Way to Fund Your Living Trust

Funding a trust is the process of transferring your assets into the ownership of a trust and re-titling them in its name. Think of a trust as a car and your assets as the fuel. Without funding your trust – essentially filling the tank — your estate planning vehicle isn’t going anywhere.

An estate plan encompasses a variety of assets from bank accounts and securities to insurance policies and retirement savings. To ensure these assets are managed according to your wishes, funding your trust is essential. This step is not just about documenting your intentions; it’s about putting them into action. Furthermore, funding your trust will protect your estate from the probate process, which can be both time-consuming and costly.

In this article, we’ll discuss the essential elements of an estate plan, the importance of life insurance and how to fund a living trust. By putting your assets in your trust’s name, they become part of the trust and create a strong foundation for your financial legacy.

The guidance you need

A comprehensive estate plan includes a will, guardianship designations, healthcare power of attorney, beneficiary designations, durable power of attorney, and a personal letter of intent outlining your wishes should you pass away or become incapacitated.

Some people are surprised to learn that signing their will or trust document is not the final step in estate planning. They must also re-title their assets into the name of their trust before they pass away. This is important because if their assets are not properly transferred, they could be subject to probate.

Funding a revocable living trust is generally a simple process, as the trustor usually retains control over the assets and can function as the trustee. But what types of assets can be funded into a trust?

  • Real property such as family homes. To move real estate into a trust, you typically use a deed, often a quitclaim deed.
  • Vehicles and other titled personal property such as cars, boats and motorcycles.
  • Bank accounts
  • Investments such as stocks and bonds
  • Insurance. A trust can hold the ownership or be the beneficiary of a life insurance policy, allowing a successor trustee to oversee it if you’re incapacitated.
  • Retirement savings. Typically, you cannot transfer retirement accounts directly into a trust but you can name the trust as a beneficiary for accounts like IRAs, 401(k)s or health savings accounts.

If you’re exploring personalized estate planning and seeking guidance on how to fund a living trust, consulting with a professional can greatly simplify the process and help you build an enduring legacy. Please note that while Stratus Financial Partners have experience in dealing with trusts, we are not attorneys and this information should not be considered legal advice.

Checking the health of each element

Although funding a trust is just one of the essential estate plan elements, it is a vital step that transforms your plan into action. By transferring assets such as bank accounts, property, and securities into your living trust you bring them under legal protection and shield them from probate and court interference at incapacity in most cases. This offers your family peace of mind and safeguards your legacy for future generations.

When you’re crafting an estate plan, choosing the right life insurance is key. However, it’s equally important to understand what a life insurance policy should look like. Whether you’re purchasing a new policy or already have an existing one, a qualified expert can review your policy and ensure it aligns with your estate planning goals while offering adequate coverage for you and your beneficiaries.

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