How to Properly Fund a Living Trust

In addition to a will, many people opt for living trusts as part of their estate plans. Revocable living trusts can end up saving time and money by avoiding probate, and they give the grantor a high level of control over assets during their lifetime.

For 99% of people, a living trust is more useful than an irrevocable trust, which does have certain tax and creditor protection. Unlike an irrevocable trust, a living trust allows the grantor to retain control over all of the assets within the living trust during their lifetime. As such, the grantor can put in and pull out assets as they like. But a living trust does not have much use to anyone if it is not properly funded.

For residents of Glendale, California that have questions about estate planning tools like living trusts, the Glendale living trust lawyers at Ourfalian & Ourfalian can help.

What Does Funding a Trust Mean?

Executing the trust documents does not end the estate planning process. You have to physically transfer the title of your assets into the name of the trust; otherwise, any assets that are left out of the trust, i.e., are not properly transferred into the name of the trust, will wind up going through probate.

To fund a trust, you simply change the title from your name to that of the trust you wish to fund. While this is simple, in theory, it can quickly become complicated, especially if you are married. For married couples, funding a trust means changing the title of any jointly owned assets—marital assets, which include all assets acquired during the course of a marriage—to either a joint trust or each spouse’s individual trust.

Determining how to split these assets can be complex, and will likely require the assistance of an experienced estate planning attorney. However, as the California Department of Justice warns, beware of unscrupulous individuals working for living trust mills in California that sell invalid and unnecessary living trusts to unsuspecting victims. Only trusted estate planning attorneys are qualified for this type of work.

What Types of Assets Can I Use to Fund My Living Trust?

Many types of assets require a new title (proof of ownership) document before they can be used to fund a living trust. To do this, you need to change the title of said assets from your name to the name of the trust. Examples of assets that require this title transfer include real estate, stocks, and bank accounts. Some assets, such as personal belongings or heirlooms, do not require title documents. Below is a list of all types of assets that can be used to fund a living trust:

• Checking accounts
• Savings accounts
• Money market accounts
• CDs
• Real property
• Non-retirement investment accounts including brokerage and mutual funds
• Bonds and stock certificates
• Shareholder stock
• Business interests
• Non-liquefied annuities
• Notes payable to you
• Safety deposit boxes
• Personal property and family heirlooms

Are There Assets I Should Not Use to Fund the Trust?

Some assets should not be transferred to a living trust. For example, retirement accounts and 401(k) Plans should not name the trust as the primary beneficiary. Since the trust is not a natural person, the trust would have to take a mandatory distribution of the entire retirement account and pay income taxes currently. Your children or other persons who you have designated as beneficiaries of such retirement accounts would have rollover rights deferring the payment of income taxes. As such, unless the designated beneficiaries of such accounts are not seen as being in a position to manage a retirement account, such retirement accounts should be distributed directly to these beneficiaries, rather than your trust. There are other ways to pass down these assets, however, which an attorney can help you with.

• 401(k) accounts
• 403(b) accounts
• IRAs
• Certain qualified annuities
• Certain other retirement accounts
• Health savings accounts
• Interests in professional corporations
• Incentive stock options
• Active bank accounts
• Vehicles

How Can I Use Real Property to Fund My Living Trust?

Real estate is usually the most valuable asset an individual or married couple owns. The current median home sale is $1.2 million in Glendale, according to the online real estate marketplace Realtor. As such, many believe it would make sense to fund your living trust with your most valuable asset.

In order to accomplish this, the real property must be re-titled, including executing a trust transfer deed, which must be notarized, and then sending off the deed to be recorded by the county. While you may be able to handle some of the more straightforward types of bank account and investment transfers necessary to fund your living trust, real property is not so simple. This is one of the reasons you should consider working with an attorney to create and fund a revocable living trust.

What if I Forget to Transfer Assets To My Living Trust?

Your trust package is normally accompanied by a document called “pour-over will” that causes any forgotten assets to pour over or be transferred to your trust at your death. While this does not avoid the probate process, it at least ensures that such “forgotten” assets are passed down in accordance with beneficiary designations and instructions contained in your trust agreement, in accordance with your wishes.

While the funding process may not be difficult, many people delay such funding process; this is why it is recommended to consult with experienced living trust attorneys to help you with the process. In the future, as you acquire more properties, just remember to title those properties in the name of your trust!

Benefits of Creating a Living Trust

• Greater Privacy—Assets distributed to beneficiaries through a will must pass through probate, the official proving of a will. A will is a public document once it goes through probate. As such, information about accounts, assets, and beneficiaries will also become public knowledge. When it comes to a living trust, “who gets what and how much” is a private matter. There will be no public record surrounding your assets or accounts.
• Flexibility and Retraining Control Over Assets—An alternative to a revocable living trust is an irrevocable trust. There are some pros to revocable trusts for certain individuals, but a living trust allows much greater flexibility. Health issues, financial constraints, and other unforeseen circumstances may arise after you create and fund a living trust. Because you retain control over the assets within the trust until you pass away, having access to those assets may be of significant importance to you.
• Avoiding Probate—Probate often takes half a year or longer to be completed and for beneficiaries to have access to their inheritances. A living trust can expedite the bequeathal timeline, as well as save money, in many circumstances, by avoiding the costly probate process.

Call a Glendale Living Trust Estate Planning Attorney Today

Many aspects of estate planning can be carried out on your own. Others, such as funding a living trust, should be handled by a qualified and trusted Glendale estate planning attorney. There is no reason to procrastinate when it comes to estate planning. The sooner you begin, the better off you and your loved ones will be in the long run. We urge you to call a Glendale estate planning attorney at Ourfalian & Ourfalian today. Call us at (818) 550–7777 to schedule a free consultation.