What Does Funding My Living Trust Mean and How Do I Do That?
Funding your trust is the process of transferring ownership of your assets from you to your trust. To do this, you physically change the titles from your individual name (or joint names) to the name of your trust. You will also change most beneficiary designations to your trust so those proceeds will flow into your trust when you die.
This is important, because if you have signed your trust document but haven’t changed titles and beneficiary designations, you will not avoid probate. Your trust can only control the assets you put into it. You may have a really good trust document, but until you fund it (transfer your assets to it), it doesn’t control anything. If your goal in having a living trust is to avoid probate at death and court interference at incapacity, then you must fund your trust now while you are able.
Some people are surprised to learn they aren’t finished when they sign the trust document. When you sign a will, that’s all you have to do. But the process of changing titles when you have a will occurs after you die, and is handled by the probate court and attorneys. When you fund your trust, you are changing the titles now so there will be nothing for the courts to do when you die—or if you become incapacitated before then. So you can take the time to do this now or you can pay the courts and attorney to do it for you later.
You are ultimately responsible for making sure all of your appropriate assets are transferred to your trust but, in most cases, you will transfer some and your attorney will transfer some. Most attorneys will transfer your real estate, then provide you with instructions and sample letters for other assets. Ideally, your attorney will review each asset with you, explain the procedure and help you decide who will be responsible for transferring each one. For some assets, a short assignment document will be used; others will require written instructions. But most can be handled by mail or fax. Once you understand the process, you may decide to transfer many of your assets yourself and save some on legal fees. (There may be a few assets your attorney advises you to leave out of your trust; if so, make sure you understand why and what will happen to them.)
If you forget to transfer an asset, it can still be part of your living trust plan. Along with your trust document, your attorney will prepare a short “pour over” will that acts like a safety net. When you die, the will “catches” any forgotten asset and sends it into your trust. The asset will probably have to go through probate first, but then it can be distributed according to the instructions in your trust.
While the funding process is not difficult, it will take some time and it’s easy to get sidetracked or procrastinate. Make a list of your assets, their values and locations, then start with the most valuable ones and work your way down. Remember why you are doing this, and look forward to the peace of mind you’ll have when the funding of your trust is complete.
About the author
Vickie Schumacher is the author of the best-selling book, Understanding Living Trusts®, and is nationally known for her ability to explain the benefits of living trusts and estate planning in clear, conversational English. She has a unique perspective on what consumers want, what they understand, and what motivates them when it comes to estate planning—because she is a consumer, too.