Many individuals and families set up trusts as part of their estate planning, and they are fantastic tools that can make it easier to administer or execute an estate in the future.
However, often people neglect to follow through on one of the most important aspects of trusts: funding it.
The stakes are high: an unfunded or partially funded trust doesn’t avoid probate, which is one of the primary benefits of creating a trust in the first place.
To fund a trust, you must do two key things:
Make ownership changes to the title of assets such as your house, vacation home, boat, bank accounts, businesses you own, etc. by switching it from your personal name as an individual to your name as Trustee of your trust
For other assets such as life insurance and retirement accounts, you will make beneficiary changes so that those assets are properly distributed upon your death
Accomplishing these two important tasks often requires signing, notarizing, and filing new deeds for real estate or property, signature cards or pay-on-death-beneficiary documents with your bank, or survivor ownership documents. You will also likely need to file new beneficiary forms for individual retirement accounts, pension plans, and life insurance.
When you create a trust, the portfolio of paperwork related to that trust will include a Certification of Trust that documents you are the Trustee of your trust and have the authority to make these changes, however most institutions have their own forms that they will require you to complete (and some may require notarization).
In addition to help from an estate planning attorney, you may also need guidance from your financial advisor, accountant, broker, or life insurance agent to make ownership or beneficiary changes. If you have trouble making ownership or beneficiary changes to any accounts, it can be helpful to include your estate planning attorney on a call with the institution to help explain the matter and request proper documentation.
Once you have completed the ownership and beneficiary changes for every account and asset, you should place a copy of that paperwork into a folder along with your estate planning documents and keep them in a safe place so that your family or loved ones know where to find your assets and how each asset or account is owned.
While it may seem overwhelming, funding a trust is not that hard. It takes patience, organization, research skills to find the right forms you’ll need to submit, and some time spent on hold with customer service representatives at the institutions you do business with to get your questions answered. Create a checklist of all the accounts you need to make changes on, keep track of the status of your request, and keep copies of the final confirmation or proof that the changes were made.
When you open new accounts in the future, buy another home, start another business or create a new asset, you should also consult with your estate planning attorney on putting the ownership or beneficiary designations in the name of your trust.
As with all estate planning matters, it’s also important to periodically revisit and update your will, trust, and other documents, especially as major life events occur such as marriage or domestic partnership, divorce, the birth of additional children or adoption, or children turning 18 and becoming legally recognized adults.
Disclaimer: This content is for informational purposes only, and does not constitute legal advice nor create an attorney-client relationship with Bequest Law.