Creating a trust is a significant step in safeguarding your legacy and ensuring your assets are distributed according to your wishes. However, many people overlook a crucial aspect of trust planning: funding the trust.
At the Law Office of Brenton C. McWilliams, we ensure your trust is properly funded to protect your assets and provide lasting benefits for you and your family.
What Does It Mean to Fund a Trust?
Funding a trust involves transferring ownership of your assets from your name to the name of your trust. This process is important because a trust can only control the assets it owns. Without proper funding, your trust may be an empty vessel, unable to fulfill its intended purpose.
Why Is Funding Your Trust Important?
1. Avoiding Probate
One of the primary reasons people create trusts is to avoid probate. Probate is the court-supervised process of distributing a deceased person’s assets. It can be time-consuming, expensive, and public.
However, a trust can only help you avoid probate if properly funded. Assets not transferred to your trust may still need to go through probate, potentially negating one of the main benefits of having a trust.
2. Ensuring Your Wishes Are Carried Out
When you create a trust, you have specific intentions for how your assets should be managed and distributed. If your trust isn’t funded, these carefully laid plans may not be executed as intended. Proper funding ensures that your assets are governed by the terms of your trust, not by default state laws or other estate planning documents.
3. Maintaining Privacy
Unlike wills, which become public record during probate, trusts offer privacy. However, this privacy is only maintained for assets held in the trust. Unfunded assets that go through probate lose this privacy protection, potentially exposing your family’s financial matters to public scrutiny.
4. Providing Seamless Asset Management
A funded trust allows for seamless management of your assets, even if you become incapacitated. Your designated trustee can step in and manage trust assets without court intervention, ensuring your financial affairs continue smoothly during a difficult time.
5. Potentially Reducing Estate Taxes
While not everyone’s estate will owe taxes, for those with larger estates, a properly funded trust can be a valuable tool in minimizing potential estate taxes. This can help ensure more of your assets go to your chosen beneficiaries rather than to the government.
Common Assets Used to Fund a Trust
When funding your trust, consider transferring ownership of:
- Real estate (including your primary residence)
- Bank accounts
- Investment accounts
- Business interests
- Personal property of significant value
Remember, certain assets like retirement accounts and life insurance policies are typically best left outside the trust, with the trust as a beneficiary instead.
The Risks of an Unfunded Trust
An unfunded or partially funded trust can lead to several problems:
- Probate Expenses: Assets not in your trust may need to go through probate, incurring unnecessary costs and delays.
- Unintended Beneficiaries: Without proper funding, your assets may be distributed according to your will or state intestacy laws, potentially to beneficiaries you didn’t intend.
- Loss of Incapacity Planning: If you become incapacitated, assets not in your trust may require a court-appointed guardian to manage them rather than your chosen trustee.
- Increased Complexity for Your Loved Ones: An unfunded trust can create confusion and additional work for your family during a difficult time.
How to Fund Your Trust
Funding a trust involves changing the ownership of your assets from your name to the name of your trust.
This process varies depending on the type of asset:
- For real estate, you’ll need to execute and record a new deed.
- For bank and investment accounts, you’ll typically need to open new accounts in the name of your trust.
- For personal property, a general assignment of ownership is often used.
While some of these steps can be done independently, working with an experienced estate planning attorney ensures the process is completed correctly and comprehensively.
Ongoing Trust Funding
Trust funding isn’t a one-time event. As you acquire new assets or your financial situation changes, you’ll need to consider whether these new assets should be placed in your trust. Regular reviews of your estate plan can help ensure your trust remains properly funded over time.
How Your Estate Planning Attorney Can Help
At the Law Office of Brenton C. McWilliams, we don’t just help you create a trust—we guide you through the entire process, including funding. We can:
- Help you identify which assets should be placed in your trust
- Assist with the paperwork and legal documents needed to transfer assets
- Provide guidance on maintaining your trust funding over time
- Offer regular reviews to ensure your estate plan continues to meet your needs
Creating a trust is an important step in estate planning, but it’s only the beginning. Proper funding is what brings your trust to life and ensures it can carry out your wishes effectively. Don’t leave your trust empty and your legacy at risk.
If you’re ready to create a trust or need help funding an existing trust, the Law Office of Brenton C. McWilliams is here to help. We’ll work with you to develop a comprehensive estate plan that safeguards your assets and provides for your loved ones according to your wishes. Call our office today to start a conversation about your estate planning needs and how we can help you fund your trust properly.
