In years past, trusts were used almost exclusively by wealthy families as a tool to pass down the family fortune while avoiding estate taxes and retaining some degree of control over the assets held by the trust. Trusts have come a long way, however, since those days and are now commonly used by anyone creating a comprehensive estate. If you are contemplating the addition of a trust in your estate plan you may be wondering how you fund your trust. Funding a trust is actually very simple.
A trust can be funded by almost anything of value. While cash certainly works as a funding mechanism, so does property, stocks, bonds, life insurance proceeds, and just about anything else that has value. In fact, if you are planning to create a revocable living trust for incapacity purposes you will likely want to fund your trust with all of your assets. The reason for this is that the goal of a revocable living trust that was created for incapacity planning purposes is to provide for the rapid and simple shift of control over all assets from the trustee to the successor trustee in the event of the incapacity of the trustee. Using a trust in this way enables your spouse/adult child/parent, for example, to gain legal control over all of your assets very quickly and without court interference should you suddenly become incapacitated.
The important thing to understand when it comes to funding your trust is that all assets you intended to use to fund the trust must be re-titled in the name of the trust. Real property, for example, must be re-deeded so that the trust is now the owner of the property. The same applies to stocks, bank accounts, any anything else used to fund the trust. Likewise, life insurance policies that are to pay out to the trust must list the trust as the beneficiary.
There are few restriction with regard to what can be used to fund a trust. As long as you complete the legal steps necessary to transfer ownership into the trust’s name, almost any of your assets can be used as funding for your trust.
Be sure to consult with your estate planning attorney if you have questions about which assets to use to fund your trust.
Stephen A. Mendel, Estate Planning Attorney
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