Funding a Trust


Trust funding is a critical aspect of estate planning, involving the process of retitling assets into the name of a trust. This procedure is essential for ensuring that a trust operates as intended, but it’s not always necessary for every asset.

Key points in trust funding include:

  1. Automobiles: Typically, it’s not advisable to fund automobiles into a trust due to potential increases in insurance rates and liability risks. Additionally, in the event of the owner’s death, automobiles are relatively straightforward to transfer without probate.
  2. Marital Status: Funding strategies vary based on marital status. For long-term, stable marriages, it may not be necessary to immediately fund joint assets into a trust, especially if assets are owned as tenants by the entirety. This ownership structure offers asset protection and allows for automatic transfer to the surviving spouse, negating the need for probate.
  3. Real Estate: The decision to fund real estate into a trust depends on several factors. For non-homestead properties, especially those out of state, funding into a trust is often recommended to avoid double probate. However, funding homestead properties requires careful consideration due to various rules and statutes.
  4. Life Insurance and Tax-Qualified Accounts: Generally, changing the ownership of life insurance policies and tax-qualified accounts (like IRAs and 401Ks) into a trust is not recommended. However, updating beneficiary designations to include trusts can be beneficial, depending on individual circumstances.
  5. Non-Qualified Investment Accounts and Bank Accounts: These typically involve straightforward funding, requiring just a change in the account’s ownership details.

The process of funding trusts varies with each financial institution, and specific forms may be needed. For real estate, particularly, involving an attorney is strongly recommended to ensure correct and legal transferring of ownership.

Trust funding is a nuanced process that requires careful consideration of each asset and personal circumstances. It’s crucial to seek tailored advice from an attorney to determine the best course of action for funding trusts.

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