Funding of Trusts

A trust is essentially a contract that owns assets.  “Funding” is the process of transferring title from you to your trust.

Statistics show that approximately 85% of estate plans fail – meaning the plan does not accomplish its owner’s objectives.  Why?  While many law firms draft trust documents, very few see that assets are properly titled in the trust’s name.  Failure to fund a trust can render that trust ineffective upon a client’s death.  Trusts can avoid probate court entirely, but only if properly funded.
 
At Estate & Business Law Group, our Funding Coordinator works in partnership with our clients to make the funding process smooth and effective.  Unlike the legal profession’s standard of not funding the trust, we prepare all necessary funding paperwork for our clients.  We take care of all the details and meticulously verify that title changes are properly made.


Trusts that are not fully funded are subject to:

•         Probate proceedings (court)
•         Guardianship proceedings (court)
•         Increased tax expenses
•         Distribution of property to unintended beneficiaries

 


Articles:

Understanding Funding your Living Trust
 


Frequently asked Questions about Funding

How does one place assets into a Revocable Living Trust?
What are the benefits of funding a Revocable Living Trust?
 


































 


How does one place assets into a Revocable Living Trust?

If you create a trust, you will need to decide what property of yours should be placed into your trust so that your trust assumes legal control over it. Property is placed into to a trust simply by changing its title to name the trust as its legal owner. This process of changing title is called “funding” the trust.

Almost any type of property can be funded into a trust. The funding process consists of simply signing documents that name the trust as the new owner of your property. For example, some assets such as real estate, are funded into a trust by preparing and signing a new deed that names the trust as the new owner.

Other assets such as savings accounts, are funded into a trust by signing a new signature card that names the trust as the new owner of the account. Still other assets (personal property including household furnishings, jewelry, etc.), are funded into a trust by signing a document known as an “assignment” that names the trust as its new owner.

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What are the benefits of funding a Revocable Living Trust?

Funding a trust takes a little work, but it is well worth the effort for one very important reason: the Trustee has legal control only over property titled in the trust’s name. Any property not titled in the name of the trust is never legally owned by it and property not owned by the trust is in danger of having to be probated when its owner dies; however, property that is properly titled in the name of the trust never has to go through probate court because trusts never die!

If the funding process sounds confusing to you, thinking of it in another way might help. Some have described a Revocable Living Trust as a “magic box” in which you place all of the titles to your property. You just open the top of the box and place in it the deed to the house, the car, the checking account, the investment account, and anything else desired. Since you can name yourself as the Trustee of your own trust, you will maintain legal control over everything you put into your magic box. At any time you want you can just reach into the box and take out the title to any asset and do with it as you please. You can sell, trade, invest, or give it away just as if you never had a trust. And at your death, it is as if the magic box is automatically handed to your designated successor trustee to administer your property according to your instructions. All this happens without your property being probated.





































GLOSSARY

 
Beneficiary  One who receives property pursuant to a will, a trust, an insurance policy, an individual retirement account, or other third-party beneficiary contract.   Back to Top
 

 
Probate A court proceeding to determine competency or custodial rights (living probate), or to determine the validity of a will and the oversight of the procedure by which the assets of a decedent are administered under the provisions of a will.   Back to Top