If you want your revocable living trust to be more than a pile of legal papers, you must fund it. Why? Because your successor trustee, who serves if you become incapacitated or die, only has authority to manage assets that are funded into the trust. If you created your trust with the goal of avoiding probate, as many Californians do, only a fully funded trust avoids probate. Bottom line: if your assets aren’t in your trust, your trust will probably not do what you expect.
What is Funding?
Confused about what “funding” means? “Funding” refers to the transfer of the title of your assets into your trust. For beneficiary designation assets, it means that the beneficiary is changed to the name of your trust.
How do I Know if an Asset is Funded?
You’ll know if your asset is funded by looking at the deed to your real estate or your financial statements for bank accounts and investments. For retirement accounts, life insurance, and annuities, check the beneficiary designation.
If you see your individual name (i.e. Elvis Presley) or joint names (i.e. Elvis and Priscilla Presley), your asset is NOT funded into your trust.
If you see the trust’s name, that asset is funded. Here is an example of what Elvis and Priscilla’s trust name would look like. Substitute your own names and the date your signed your trust to see what your trust name would look like.
Elvis Presley and Priscilla Presley, trustees, under the Elvis and Priscilla Presley Living Trust, dated May 1, 1967.
Not all assets should be in your trust
This is a very difficult and confusing area for some estates. Depending on the ages of your children, items like life insurance, pension plans, IRAs, 401ks, may be better left to a designated beneficiary. It is an area in which you should seek professional advice.
Where You Can Get Help with Trust Funding
Your estate planning attorney will draft the deeds funding any real estate into your trust. Your financial advisor, banker, and insurance professionals can also assist.
If you have any questions about funding, consult with a qualified estate planning attorney. Call our office today at 858-792-5988 for a free consultation.