1.What does it mean to "Fund" my trust?
Funding your trust is the process of transferring your assets from you to your trust. To do this, you physically change the titles of your assets from your individual name (or joint names, if married) to your name(s) as trustee(s) of your trust.
2. Who controls the assets in my trust?
The trustee you name will control the assets in your trust. Most likely, you have named yourself as trustee, so you will still have complete control. One of the key benefits of a revocable living trust is that you can continue to buy and sell assets just as you do now. You can also remove assets from your living trust should you ever decide to do so.
3. Why is so important to fund my trust?
If you have signed your living trust document but haven't changed titles and beneficiary designations, you will not avoid probate. Your living trust can only control the assets you put into it. You may have a great trust, but until you fund it (transfer your assets to it by changing titles), it doesn't control anything; your living trust can only control the assets you put into it. If your goal in having a living trust is to avoid probate at death and court intervention at incapacity, then you must fund it now, while you are able to do so.
4. What happens if I forget to transfer an asset?
Along with your trust, you should have a "pour over will" that acts like a safety net. When you die, the will "catches" any forgotten asset and sends it to your trust. The asset will probably go through probate first, but then it can be distributed according to the instructions in your trust.
5. Who is responsible for funding my trust?
You are ultimately responsible for making sure all of your appropriate assets are transferred to your trust. Typically, you will transfer your assets to your trust.
6. Is the funding process difficult?
It's not difficult, but it can take some time. Living trusts are so widely used, you should have little or no resistance when transferring your assets. I can assist you with preparing the transfer documents/deeds for most assets, but for such things as bank accounts, you will need to go your financial institution to sign new signature cards.
Some financial institutions will want to see proof that your trust exists. A copy of your Certificate of Trust should be enough proof for most institutions. This is a shortened version of your trust that verifies your trust's existence, explains the powers given to the trustee and identifies the trustees, but it does not reveal any information about your assets, your beneficiaries and their inheritances. Some institutions will also have you complete their own forms and I am available to review anything needed.
7. Which assets should I put in my trust?
The general idea is that all of your assets - bank accounts, investment accounts, business interests, notes payable real property, etc. should be in your trust. The common exceptions are annuities, IRAs and retirement plans.
8. If I put real estate in my trust will this be a inconvience?
In most cases, you will notice little difference. I can assist you by preparing the deed(s) to your real property. Should you decide to refinance or get an equity line of credit, the lender may request you take the property out of trust ownership until the loan is funded. While this can be annoying, it is a minor inconvenience that is easily satisfied.
Because your living trust is revocable, transferring real estate to your trust should not disturb your current mortgage in any way. Even if the mortgage contains a "due on sale or transfer" clause, retitling the property in the name of your trust should not activate the clause. There should be no effect on your property taxes because the transfer does not cause your property to be reappraised. Also, having your home in your trust will have no effect on your being able to use the capital gains tax exemption when you sell it.
Also, having your trust as the owner on your homeowner, liability and title insurance may make it easier for a successor trustee to conduct business for you. Check with your agent.
9. What about my IRA and other tax-deferred plans?
Do not change the ownership of these to your living trust. The most common beneficiaries include your spouse; children, grandchildren or other individuals; a charity; or a combination of these. Whom you name as beneficiary will determine the amount of tax-deferred growth that can continue on this money after you die. You need to talk to your attorney before you can name your trust as the beneficiary. There are stand alone retirement trusts you may want to consider.
Most married couples name their spouse as beneficiary because 1) the money will be available to provide for the surviving spouse and 2) the spousal rollover option can provide for many more years of tax-deferred growth. (After you die, your spouse can "roll over" your tax-deferred account into his/her own IRA and name a new beneficiary, preferably someone much younger, as your children and/or grandchildren would be.) A beneficiary that is not a spouse can also inherit a tax-deferred plan and roll it into an IRA to continue the tax-deferred growth, but only a spouse can name additional beneficiaries.
Of course, any time you name an individual as beneficiary, you lose control. After you die, the beneficiary can do whatever he or she wants with this money, including cashing out the account and destroying your carefully made plans for long-term, tax-deferred growth. The money could also be available to creditors, spouses and ex-spouses, and there is the risk of court interference at incapacity.
10. What about property without a title?
Personal property (jewelry, artwork, cameras, sporting equipment, clothing, books and other household goods) typically does not have a formal title. I will prepare an assignment to transfer these items to your trust.
11. What if I buy new assets after I fund my trust?
Find out if you can take the title initially as trustee of your trust. If not, transfer the title right away. If you're not sure how to transfer it, contact my office for instructions.