“Funding” your living trust. What does it mean and how do you do it? This post will not be an exhaustive explanation of every possible asset you may want to transfer to your living trust, but it will be a good start with the most common assets my clients own. As always, consult with an experienced estate planning attorney before making decisions about the following information.
A living trust is “funded” when it owns something. A piece of property, a bank account, a business, personal property. How does a living trust own something? By transferring title from the owner as an individual to the owner as trustee of his or her living trust.
Retirement Accounts and Life Insurance Policies: These accounts and policies fund a trust through pay on death and/or beneficiary designations. Your beneficiary at your death should be your living trust. Some qualified retirement accounts like IRAs may have tax consequences associated with naming a living trust as a beneficiary. Always consult with an experienced benefits advisor before designating a beneficiary of your IRA or other qualified plan.
Real Property: If you own a piece of property and want that property to pass through your living trust after your death, you must always hold title to the property in the name of your trust. In California this is accomplished by a simple quitclaim deed but every state is different. The moment that deed is recorded with the county, your trust owns an asset and it is a “funded” living trust. If you ever refinance the property and need to change title back to your name as an individual, you MUST remember to execute another quitclaim deed and record it with the county. If you buy new property, regardless of where it is located, your living trust should be on title as the owner.
Financial Institution Accounts: Bank, credit union and brokerage accounts usually have an owner and a beneficiary or pay on death designation. Best practice is to change the owner of your accounts to the name of your trust after you create your living trust. A close second best practice is to name your trust as the beneficiary of your account after your death. Every account you own and every account you own in the future, should be properly titled this way.
“Schedule A”: Most living trusts will have a “Schedule A” attached to the last page which lists the assets of the trust. This document should be updated throughout your life when you open a new bank account, purchase a business or piece of real property or buy any other asset. Date and sign next to new assets you add to this list.
All of the above actions will serve to properly fund your trust during your life– and keep it funded. That means keeping your family out of probate court and allowing for simple administration of your trust estate.
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Brittany Britton is licensed to practice law in the state of California only.