You’ve now created your Living Trust. Congratulations! That is one of the biggest steps you can take to secure your financial legacy on behalf of your heirs.
Now what? The next step is called Funding.
A Trust is only as good as the items that are in it. That’s right, if an asset is not in your Trust, it is not controlled by your Trust.
Here’s a quick overview of how you should fund your trust with your different types of assets:
- Real Estate: You must transfer your house or other real property into your trust. This should ideally happen the day you create the Trust. The importance of this is that any real property not in a Trust would need to go through a Probate to pass to heirs.
- Financial Accounts: You can also put various financial assets into your Trust, like stocks, bonds, savings and checking accounts. I normally advise my clients to use the Transfer on Death beneficiary designation, and simply name the Trust the beneficiary of the asset.
- Life Insurance: You can name your trust as the beneficiary of your life insurance policy. Depending on your situation, you may wish to name a loved one as the first beneficiary and the Trust as the contingent beneficiary. Speak to your attorney on the best option.
- Valuable Personal Property: Items like jewelry, artwork, and collectibles generally do not go into a Trust. While the Trust can refer to them, these items are handled by the Will, which is part of a complete Estate Plan.
- Business Interests, Partnerships and LLCs: If you own a business, you can transfer your ownership to your Trust. However, this can by tricky so consult your attorney to make sure it gets done right.
While funding your Trust is an important step, it does not have to be difficult. Work closely with your attorney to make sure it’s handled correctly.