Have you ever wondered how to protect your assets and ensure their distribution according to your wishes after you pass? A living trust might be the ideal solution for you. However, creating a trust is just the first step; funding it is equally crucial.
It is important to understand what funding a living trust means, how to fund it and why it is essential for estate planning.
What does funding a living trust entail?
Funding your living trust may involve transferring ownership of your assets from your name to the trust’s name. This process is vital because its terms control only assets owned by the trust. Assets left out of the trust may have to go through probate, which can be time-consuming and costly for your beneficiaries.
Types of assets you could fund your trust with
You may fund your living trust with various assets, which may include:
- Real estate
- Bank accounts
- Investment accounts
- Vehicles
- Valuable personal property
Certain assets, such as retirement accounts and life insurance policies, typically use beneficiary designations. Therefore, transferring them to the trust may not be necessary.
Why funding your trust is crucial
Adequately funding your trust may offer benefits, including:
- Avoiding probate
Assets in the trust bypass the probate process, saving time and money.
- Privacy protection
Unlike wills, trusts are not public records, keeping your affairs private.
- Smooth asset management
If you become incapacitated, your successor trustee can easily manage trust assets on your behalf.
While it may be possible to fund your trust yourself, working with an estate planning attorney could ensure you do not miss any crucial steps. They can guide you through the process and help you avoid common pitfalls.
Funding your trust is not a one-time event. As you acquire new assets or your financial situation changes, you may need to update your trust accordingly. Think of it as a living document that grows and evolves with you.
Funding your living trust is critical in ensuring your estate plan works as intended. Properly transferring your assets may set up a smoother transition for your loved ones and protect your legacy for the future.
