“Funding” Your Trust
- For purposes of this article, assume you have made the smart choice of creating a Trust which is drafted perfectly for your needs. It is extremely important to understand that only assets retitled to your Trust after it is signed are controlled by your Trust. An unfunded, or partially funded Trust does not avoid probate or protect assets and may cause disappointment.
- When your Trust was created, you or your Trustee may have signed a “Certification” or “Memorandum” of Trust. The Certification of Trust contains very helpful information used to title accounts without disclosing confidential details. An example of an account title is:
“Carol Brady and Michael Brady, Trustees of the Carol and Michael Brady Trust, dated September 13, 2023.”
- Real Property
- Transferring your real property to your Trust should be handled by a lawyer familiar with the Trust as it will require consideration of tax issues and be based on the nature of the current title to the property. Ultimately, the transfer will require preparing, executing, and recording a new deed for each property. Additionally, your homeowners’ insurance company should list the Trust as an additional insured to avoid any issues should a claim arise.
- Most bank accounts should be amended or created to show the Trust ownership of that cash. Use caution with your certificates of deposit to make sure that the bank does not consider the change in account name to be an “early withdrawal” that incurs a penalty.
- Stocks and Bonds and Investment Accounts
- If you have investment accounts, contact your advisor to change the title of the non-retirement accounts to the name of your Trust. Your Trustee may have to complete new account applications and present a copy of your Trust in order to do so. Title to these accounts should be in the Trust name.
- If you own stocks or bonds in book entry, you will need to work with the transfer agent for the stock or bond and complete a letter of instruction and other paperwork to reissue your stock or bond with your Trust named as the new owner.
- You should never transfer the ownership of a qualified retirement plan, pension plan, or individual retirement account to your Trust. Instead, simply verify that the correct beneficiaries are listed.
- Life Insurance
- Depending on the type of Trust you created, you may want your Trust to be the owner of your whole life policy. You may also prefer the Trust be the designated beneficiary so policy benefits will be distributed according to the terms of the Trust. You will need to make this change by completing and submitting forms to the insurance company.
- “Tangible personal property” refers to things such as household furniture and furnishings, clothing and jewelry, pictures, collectibles, sporting goods, and hobby paraphernalia. Tangible personal property can be transferred to your Trust by a simple assignment document.
- Your personal vehicles usually stay outside the Trust in individual or joint name.
- Keep copies of all statements or letters confirming these changes with your Trust documents. Although it takes some effort to properly fund your Trust, the end result is worth the effort.
- Finally, review your estate plan as well as the title of. and beneficiaries to your assets periodically as all estate plans require on-going maintenance.