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The Importance of Funding Your Trust

Posted by Jessica Ward | Jun 03, 2024 | 0 Comments

Creating a Trust is a significant step in securing your estate and ensuring your wishes are honored during incapacity or after death. However, simply establishing a Trust isn't enough - funding your Trust is crucial to its effectiveness. Here's why funding your Trust is essential and what it entails. 

What Does Funding Your Trust Mean?

Funding a Trust involves transferring your assets into the Trust. This process means changing the ownership of your assets from your name to the name of the Trust. This step is critical because any asset that is not transferred into the Trust will not be managed according to the terms of your Trust, which can potentially lead to probate - a common issue that we are trying to avoid by creating a Trust.

Why Funding Your Trust is Important

  1. Avoiding Probate: One of the primary reasons of establishing a Trust is to avoid probate, a time-consuming and expensive legal process. A properly funded Trust will ensure that your assets are distributed according to your wishes and without court intervention.
  2. Ensuring Privacy: Probate proceedings are public, meaning anyone can access details about your estate. Trusts, on the other hand, maintain your privacy, as the distribution of assets occurs without it becoming public record.
  3. Streamlined Estate Management: A fully funded Trust simplifies estate management, allowing your successor Trustee to manage and distribute your assets quickly and efficiently, without waiting for probate court approval.
  4. Protecting Your Beneficiaries: By funding your Trust, you can protect your beneficiaries, especially minors, those with special needs, or those who are not good with money. Trusts allow you to set the terms and conditions for distributions to your beneficiaries, ensuring their inheritance will be used responsibly.
  5. Avoiding Legal Challenges: A properly funded Trust reduces the risk of legal challenges. If assets are not in the Trust, disputes may arise among beneficiaries or other parties, which may lead to costly legal battles.

How to Fund Your Assets into Your Trust

  1. Real Estate: Real property needs to be re-titled by executing a deed to change the title of your real property so that it reflects the name of your Trust. 
  2. Bank Accounts: Bank accounts, money market accounts, and certificates of deposits should be titled in the name of your Trust. This can be accomplished by presenting your Certification of Trust to the financial institution. 
  3. Investment Accounts: These accounts may require changing the ownership of stocks, bonds and mutual funds into the name of the Trust. 
  4. Retirement Accounts/Life Insurance: These accounts oftentimes will require that the Trust be listed as a beneficiary. 

Please note that it is important to discuss these transfers with an experienced estate planning attorney to ensure that the assets are transferred properly, and that the transfer complies with the intentions in your Trust. Additionally, some transfers may trigger unintended tax consequences, thus speaking with an attorney is wise to avoid these consequences. 

Conclusion

Funding your Trust is a critical step in the estate planning process. Without it, the Trust cannot function as intended, and your assets may not be distributed according to the terms of your Trust. By taking the time to properly fund your Trust, you ensure that your estate plan is effective, protecting your legacy and providing peace of mind for you and your loved ones. If you need assistance with funding your Trust, contact Attorney Jessica Ward at (925) 459-1777 to set up an appointment to ensure your Trust is properly funded. 

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