Creating a trust with the help of an attorney is only the first step in the estate planning process. Once the trust is signed, it is up to you to fund it. But how is that accomplished? How do you fund a trust?
What is a trust?
A trust is an estate planning tool that helps you avoid the probate process, while also securing your assets and property for your beneficiaries.
If you are the one creating a trust, then you are the “grantor.” When you place your assets and property into your trust, your appointed “trustee” will be in charge of, and must manage, the trust. The person who ultimately benefits from your trust is the “beneficiary.”
The main types of trusts include:
Revocable – With a revocable trust, the trust grantor may designate him or herself as the trustee and take control of assets within the trust. The grantor is free to change the beneficiaries or undo the trust at any time.
Irrevocable – With an irrevocable trust, the grantor waives certain rights to control the trust. The trustee becomes the legal owner, and the named beneficiaries are set. The grantor can do little to change the agreement.
What does “funding” a trust mean?
When grantors fund their trusts, they transfer their assets to the trust.
What assets should you put in your trust?
All of your assets should go into a trust, with some exceptions. Generally, grantors put the following assets into a trust:
Consult with your attorney regarding IRAs and other tax-deferred plans, stock options, and other assets.
How do you fund a trust?
Funding a trust is the process of transferring your assets to a trust account.
To fund a trust, the grantor must physically change his or her name on the asset to the trust, so that the trust becomes the legal owner of the asset.
An attorney will prepare a certificate of trust, which is a legal document that verifies the trust’s existence, for a grantor to bring when funding the trust. For example, an individual would meet with a financial advisor at the bank, who would then verify the trust’s existence before he or she makes the trust the beneficiary of a savings account. Additional steps may be necessary to move real estate assets into the trust because that process involves preparation and the recording of new deeds in the county property records.
Help is available