What does it mean to fund your trust?
Revocable living trusts have become a preferred estate planning tool for Americans across the country. Trusts offer many advantages over wills, allowing the trust creator’s assets to pass to their named beneficiaries without the need for probate. Trusts can save your loved ones in tax implications, time, and stress. For a trust to function correctly upon your death, however, you will need to do more than just sign the trust document. A trust should be properly funded so that your assets will correctly transfer upon death. Our Tampa estate planning lawyers describe the process of funding a trust below.
How to Fund Your Trust
Funding your trust involves taking your assets, which will likely include your home, vehicle, bank accounts, and the like, and retitling them to the name of the trust. It also involves taking assets with a beneficiary designation, like a retirement account, and naming the trust as the beneficiary to the asset. In funding your trust, you will make sure that your property is governed per the terms of the trust. Should you, the trust creator, become incapacitated, the selected trustee will be able to manage all of the assets within the trust. Upon your death, the named trustee can then manage and ultimately distribute the assets to the named beneficiaries.
The Importance of Funding Your Trust
There are several critical reasons why you should take the necessary steps to fund your trust. First, assets that are not held in ownership by the trust cannot be managed by the trustee. A trustee is not vested with the power to control assets that are not owned by the trust. Should you become incapacitated, the assets held outside of your trust will need to be separately managed. It will likely involve obtaining a court order providing a loved one with guardianship to manage the assets.
Next, those assets not owned by the trust will likely need to go through probate. Probate can be a lengthy and expensive process. By making a trust, but failing to fund it properly, you will be missing the main benefit of a revocable living trust. Your assets not within the trust could be subjected to taxation and may be held for a significant period of time.
In addition to needing to go through probate, the trust will have no say as to who will receive these assets. If you have a will, the assets will be distributed in accordance with its terms. Without a will, the laws of intestacy could apply or the beneficiary designation may control. Contact a Tampa trust attorney to get started funding your trust today.