People who are creating an estate plan have to determine the best option for getting assets to beneficiaries. While some opt to use their will, others may opt to use a trust. The process of transferring assets through a trust starts with creating a trust, but it doesn’t stop there.
Once a trust is established, it must be funded so it can function as intended. Funding a trust means transferring the assets to be held by it into the name of the trust. If funding doesn’t occur, the trust occurs on paper, but isn’t able to manage the property it should be handling.
Problem with failing to fund a trust
If a trust isn’t funded, the assets are still titled in the creator’s name. This can mean that it will have to go through the probate process, which is the exact opposite of the reason why most people use trusts.
Most people opt to use a trust to handle the distribution of assets after their death because it allows their loved ones to bypass probate and receive their inheritance in a more efficient manner. They also count on the privacy of a trust, but even that is disrupted if the trust isn’t funded.
Funding the trust
Different types of assets require different funding methods. Real estate typically requires a new deed in the trust’s name to be recorded with the proper county office. Bank and investment accounts would be retitled in the name of the trust, and they may need updated beneficiary designations to reflect the trust’s structure.
Personal property that doesn’t have a deed or title may need assignment documents as part of the funding process. This is more common with valuable assets, such as valuable collections or business interests, than it is with less valuable assets.
Making sure that the trust is created and funded properly is critical to minimize the stress your loved ones will deal with after you pass away. Because of the strict requirements that come with trusts, it’s often beneficial to seek assistance.
