Creating a will and setting up a trust is a great first step in planning what happens to your assets once you pass. Keep in mind, however, that estate planning is more than just a one-step process. After you have successfully set up your trust, the next step is to fund it. Funding a trust is a commonly overlooked step but is essential to execute the goals of your estate plan.
Funding your trust involves transferring your assets from you to your trust. This can be done by transferring title of various assets into a trust to be distributed per your wishes once you pass, ensuring that your property will actually be distributed how you want. A trust with no funding renders the trust practically useless, having no authority over the distribution of your assets.
Why fund my trust?
There are several benefits when funding a Trust. Here are the main ones:
Avoid Probate
Funding your trust may allow you to avoid probate. Probate can be a costly and sometimes slow process of distributing your property after you pass. Ensuring your trust is funded allows you to distribute your property on your terms, protecting inheritances against court interference.
Reduce Estate Taxes
Ensuring your trust is properly funded may help you reduce estate taxes. Transferring assets into your trust may make you eligible for certain tax exemptions and deductions, allowing you to reduce your overall tax liability and ensure your beneficiaries receive the full value of your estate.
Maintain Privacy of Donor, Assets and Beneficiaries
A funded trust will maintain the privacy of the donor, their assets, and their beneficiaries. A will generally states that the donor’s assets are to be distributed according to the terms of the trust, however, a will is a public document. The probate process requires the disclosure of accounts, assets, and beneficiaries, however, under a funded trust, this information will remain private and is not disclosed to the probate court or public.
Protection of Assets from Creditors
Funding your trust may allow you to avoid your assets being reached by creditors. Protecting your assets from creditors allows the majority of your assets to stay within your trust and to be transferred to your beneficiaries in full value.
Is it difficult to fund my trust?
Funding your trust is not a difficult process but it is important to get started now because it may take some time. The underlying process involves transferring title from your name to the name of your trust. As long as you are the trustee of your own trust, this likely will not affect your practical ownership of your assets. You will be able to manage, sell, or give away the property under the trust in the same manner as before.
Some title changes, such as bank accounts and updates to beneficiary designations, may require a simple visit to the relevant financial institution to sign paperwork. Other changes in title, such as a change in the title of real estate, may require a bit of preparation and recording of documents. Many of these steps may be completed by mail or telephone.
What assets do I put in my trust?
Titled Items
Nearly all assets should go into your trust. There may be a few, however, that you may not want or cannot put in your trust. The most common assets placed in a trust include real estate, bank and investment accounts, business interests, and notes payable. It is also beneficial to update beneficiary designations to state the trust as the primary or contingent beneficiary. Typical items that will go into your trust are items that have title.
Items with no Title
Items that do not typically have title, such as artwork or family heirlooms, may still be included in funding your trust. To fund a trust with items that do not have title, an experienced attorney can assist you in making a list of items for the trust to own. This will not only avoid probate for miscellaneous items but will allow your trustee to distribute specific items to their intended beneficiaries.
In conclusion, funding your trust is an essential step to ensuring your life-long assets are distributed according to your plans. If you already have a trust set up, it’s important to get started on funding your trust as soon as possible. It can be a lengthy process to transfer title of all your assets to your trust, but when you do you can rest easy knowing your assets will be easily and efficiently distributed after your passing.
For more information or if you would like to schedule an appointment with one of our attorneys, visit us at www.kansascityestateplanner.com or call us at 913-422-0909. At W M LAW, we are “Here to Help.”
