A trust is one of the most effective tools in estate planning, but simply creating a trust isn’t enough—you need to fund it properly so it works as intended. Funding a trust means transferring ownership of your assets to the trust, which helps avoid probate and provides seamless management for your beneficiaries. Here are some common assets that can be used to fund a trust:
Real Estate – Homes, rental properties, and vacation homes can be transferred to a trust by updating the title. This allows for a smooth transition to heirs without the delays and costs of probate. However, it’s important to consider mortgage implications, insurance requirements, and potential property tax reassessments before transferring real estate to a trust.
Bank Accounts – You can transfer checking, savings, and certificate of deposit (CD) accounts into your trust by changing the account ownership to the name of the trust. This guarantees that the funds are managed according to the trust’s terms if you become incapacitated or pass away. Another option is to keep the accounts in your name and name the trust as the payable-on-death (POD) beneficiary. This means the money remains fully accessible to you during your lifetime, but any remaining funds will transfer directly to the trust when you pass, avoiding probate.
Investment Accounts – You can transfer stocks, bonds, and brokerage accounts into your trust by changing the account ownership to the trust’s name. This allows your successor trustee to manage the investments if you become incapacitated or pass away, avoiding delays or complications. Changing ownership of these accounts involves coordinating with your financial institution and completing the required paperwork. In some situations, rather than retitling the account, it may make more sense to name the trust as the beneficiary. This way, the account transfers directly to the trust upon your passing while you retain full control over your investments during your lifetime.
Business Interests – If you own a business, transferring it to a trust can help facilitate a smooth transition if you pass away or become incapacitated. The process depends on the type of business—LLCs, partnerships, and sole proprietorships all have different rules. If you have partners, check your operating agreement to make sure the transfer doesn’t create unintended issues.
Life Insurance – While life insurance policies don’t need to be retitled to a trust, naming the trust as the beneficiary can provide controlled distribution of proceeds. This is especially useful when providing for minor children, individuals with special needs, or beneficiaries who may not be ready to manage a large sum of money.
Retirement Accounts – IRAs, 401(k)s, and other tax-advantaged retirement accounts should generally not be transferred to a trust during your lifetime due to tax consequences. However, naming a trust as a beneficiary may be beneficial in specific situations, such as protecting a minor or disabled beneficiary or ensuring controlled payouts. It’s important to consult an estate planning attorney to determine the best approach for retirement assets.
Personal Property – Items like jewelry, artwork, collectibles, and family heirlooms can be assigned to a trust through a personal property memorandum or a formal bill of sale. This assures these cherished items go to the right individuals and are distributed according to your wishes rather than being subject to probate.
Every asset comes with its own considerations when transferring it to a trust, and mistakes can create unnecessary complications for you and your beneficiaries. Proper funding is key to making your trust work as intended. If you have questions or need help ensuring everything is set up correctly, our experienced team at TrustCounsel is here to guide you through the process. Visit our contact page to find the office nearest you or fill out our online form, and we’ll be in touch to schedule a convenient appointment.