Funding a living revocable trust ensures that trust ownership is governed by the terms of the trust agreement. The selected successor trustee may administer the accounts held in the trust's name if the settlor becomes incapacitated. The successor trustee may manage and transfer the accounts held in the trust's name to the final beneficiaries named in the trust agreement after the trust's death. Funding your trust is the process of transferring your assets to your trust.
To do this, you physically change the titles of your assets from your individual name to your trust name. If you are married, you and your spouse could change the titles of your jointly owned assets to your joint trust or to each of your individual trusts, either in equal or unequal shares. Funding a living trust involves the transfer of assets. An asset not transferred to the trust is not owned by the trust and will be subject to probate (unless you have used another technique to avoid probate).
In short, if there is no living trust fund, there is no living trust. How to finance a trust varies depending on the nature of the property. You can transfer ownership or, in some cases, designate the trust as a beneficiary at the time of your death. Creating your trust is just the first part of the estate planning process.
After you sign your trust document, the next step is to fund it. The process of financing a trust involves the transfer of assets to it. There are many reasons why people base their estate plan on a living trust. Unlike a will-based plan, a funded trust avoids the slow, expensive, and public process of court-administered probate.
Trusts remain private and effective during and after your life, and you retain full control of assets that are properly funded or titled in your trust's name. The successor trustee you choose acts as a trustee and follows the terms of your trust in the event of disability or death. However, certain assets cannot or should not be financed in a trust. Creating a revocable living trust is one of the best strategies to avoid probate and leave a lasting legacy for your family.
However, the true protection that a trust provides does not come after all documents are signed; trusts must be fully funded to have a real impact on your plans. Trust funding is a do-it-yourself area, although lawyers with experience in estate and elder law will offer advice on how to finance your trust. Many lenders require you to take the property out of the Trust to refinance it, but then allow you to place the property back in the Trust after the refinancing is complete. The terms of a revocable trust specifically tell the trustee how to manage and distribute assets when the grantor can no longer make decisions, whether due to death or mental disability.
Liquidators may also choose to appoint themselves as trustees or beneficiaries of their revocable trust, depending on the reasons for the trust. When there is a revocable trust, a donor's will usually states that their assets will be distributed according to the terms of their trust. Assets held outside your trust can go through intestate succession if you do not also leave a will for assets that have not been funded in your trust. A grantor trust uses a social security number of the trust creator as a tax identification number (TIN) for the trust.
In some states, you can designate your trust as the beneficiary of a motor vehicle title, which holds the vehicle in your name, but automatically transfers it to the trust in the event of death. Making your living trust will be easier if you think about it carefully and gather the necessary information before you sit down to do so. Find out the right way to fund your trust to achieve its goals and what assets you shouldn't transfer to your trust. To create a “funded revocable trust,” you will need to re-title certain assets that are currently held in your individual or joint name in the name of the two trusts.
However, the will is a public document and the probate process requires disclosure of accounts, assets and beneficiaries that would not be disclosed through a funded revocable trust. More importantly, the impression you create from owning a living car and trust may be that you have other important assets that may be available for creditor claims, which may arise from a car accident. Many taxpayers have revocable trusts during their lifetime that become irrevocable when the second spouse who dies dies. Transferring real estate to your Trust usually requires signing a deed to transfer your interest in the property to the Trust and then registering that deed with the county.