You've wisely decided to create a trust. You have provided for control of your property during your lifetime, in the event of disability, and after death. One of the great advantages to having a trust is avoiding probate. However, all of the advantages disappear if you do not fund your trust.
Funding is the process of transferring your various assets to your trust. The type of asset determines the method of transfer. If you think in terms of how you obtained the asset, you will have a clue to transferring it. For example, you obtained your house when you received a deed. In order to transfer real estate to your trust, a deed is prepared from you, as the present owner, to you, as the trustee of your trust. Once the deed into the trust is recorded in the Registry of Deeds, the transfer is complete. Let's look at some common assets and see how they are transferred to your trust:
- Motor vehicles - if there is a certificate of title, you re-title the vehicle in the name of the trust.
- Bank accounts, including CD's - a change of name form is filled out at the bank or credit union. A W-9 may be required showing the trust's tax identification number (usually yours).
- Savings bonds - special forms are provided by the Federal Reserve or your bank.
- Stock certificates - the transfer agent for the stock is contacted and a change of name form is completed. A signature guarantee may be required.
- Brokerage accounts - similar to individual stock.
- Personal property - a document called an assignment is executed that transfers all categories of personal property that do not require special treatment.
- IRAs and other "Qualified" money - NEVER TRANSFER OWNERSHIP OF THIS TYPE OF ACCOUNT. The transfer would trigger all taxes and penalties that result from withdrawing this special asset. Consult with your attorney or accountant about these unique assets.
- Real Estate - as I said above, Real Estate is transferred by deed. Here again, consult your attorney. Some property that has been mortgaged requires the lender's consent to a transfer.
Some of the assets you transfer to your trust will be covered by one or more insurance policies. For example, your home, auto and personal possessions are usually covered. Before the actual transfer takes place, the insurance company must be notified to add the trust as an "other insured". This will ensure continuation of coverage during and after the transfer.
Note: If you have accounts or policies with beneficial designations, IRAs, life insurance, annuities, etc., make sure that the designations are consistent with your current estate plans as they will control where that property goes.
Just keep in mind that a little paperwork is required to fund your trust. There is always more in the beginning. Once your trust is fully funded, future additions will be relatively simple.