Living trusts have many advantages. Yet, many people inadvertently render them pointless by forgetting to fund them.
What are the advantages of a living trust?
Living trusts are also known as a revocable trust because you retain the right to make changes or revoke the trust altogether. They are a useful way of putting money aside in case of medical expenses. Property placed in them does not have to go through probate, and the details of your assets will not be made public on your death. While they do not provide the same protection level for your assets as an irrevocable trust, you may consider the flexibility makes up for that.
How do I fund a living trust?
To fund a living trust, you need to transfer assets into it. There are three ways of doing this. Which you use depends on the asset in question.
- Changing the beneficiary
You make the trust either the primary or secondary beneficiary. It works for the following assets:
- Life insurance
- Retirement accounts
- Health savings accounts
- Medical savings accounts
- Changing the title
Some assets have official titles. If this is the case, you need to change the titleholder from yourself to the trust. This could apply to:
- Stocks and bonds
- Bank accounts
- Non 401(k) retirement plans
- Assigning ownership
If there is no title to an asset, you must assign the ownership to the trust in the trust document. You might use this for the following assets:
- Intellectual rights
- Specific mineral rights
Accurate paperwork is essential when creating and funding your living trust. You should seek an attorney’s help to ensure you do everything in the correct legal manner.