“Funding” is a common term used by estate planning attorneys. Once we create a trust for our clients, we discuss the importance of funding their trust. This is usually met with, “What do you mean, ‘fund’?”
Executing a trust provides an orderly disposition of your estate and avoids probate. However, simply signing the trust will not achieve this result. The trust must also obtain legal title to your property. This is called “funding” the trust. Once you have executed your trust, it is critical to ensure that all appropriate assets are re-titled into the name of your trust. Funding is simply changing the title of assets into the name of the trust.
Real property: If you own a home or land, you must retitle the property into the name of your trust. This involves executing a trust transfer deed and having it recorded in the county where the real property is located. This is a service our firm provides with every estate plan we create.
Bank accounts: We recommend changing the ownership of your checking and savings accounts to the name of your revocable living trust. This is done using the Certification of Trust that is contained in your estate planning package. It is also important to remove any beneficiary designations from your accounts.
Life insurance: We recommend ensuring that the beneficiary designations on your life insurance include a primary and contingent beneficiary. Whether to name your trust as a beneficiary is a question to address with an attorney.
Retirement accounts: We recommend not placing these accounts in the name of your trust as the trust would be required to take a mandatory minimum distribution. Designated beneficiaries have rollover rights, which will defer payment of income taxes. We recommend ensuring that your account contains a primary and contingent beneficiary.
Cars and other valuables: It is not necessary to place title of your vehicle in the name of your trust unless it is of very high value. Other valuables can be distributed to your loved ones through specific gifts made in your trust or a memorandum.
Creating an estate plan is the perfect time to do a financial check-up and ensure your beneficiaries are up to date. When my husband and I went through the process of funding our trust, we discovered that his mother was the beneficiary of a sizable annuity. We now have three children, and it is our wish to ensure our estate planning benefits them.
The last thing I want is to burden my children with legal expenses or have my assets enter probate because I didn’t properly fund my trust. Estate planning does not have to be difficult, but it can provide peace of mind and long-term benefits for the entire family.
Kariann Voorhees is an attorney and partner at Voorhees & Ratzlaff Law Group