After creating a trust, your next steps are to ensure it has been funded. Whether you have an existing trust or are starting the estate planning process, Legacy Law Centers can help you.
When it comes time to fund your revocable or irrevocable trust, there are several steps to take. Keep in mind that funding your trust now while you are able is essential to avoid the probate process and court interference. If you don’t fund your trust, all those good intentions and wishes expressed in your trust document won’t mean anything!
What is Trust Funding?
Funding your trust is the process of changing the name of your assets from your own to the trust. That way, should you become incapacitated or pass away, your property can be managed according to the instructions in the trust. This helps protect and preserve your wealth for your loved ones and can provide estate tax benefits, among other things.
After creating a Trust, you must fund it with cash, investments, real estate, personal property, or other assets. This means transferring legal title to these assets from yourself (the grantor) to the trustee on behalf of the trust document. To do this, you need to physically change the titles from your individual name to the name of your trust. You will also change most beneficiary designations to your trust so those proceeds will flow into it at your death.
How do I Fund My Trust?
Funding your trust is an important step in estate planning. It’s the process of transferring assets from you, as the grantor, to your trust. This helps ensure that those assets are managed and distributed according to your wishes after you pass away. Here’s how it works:
What Assets Can be Transferred?
Most assets, like real estate, bank accounts, investments, and more, can fund your trust. It is important to note that not all types of assets can be titled in the name of a trust—for example, retirement accounts have their own set rules regarding beneficiary designations and distributions upon death. Additionally, some states limit how much real estate can be placed in an irrevocable trust without triggering adverse tax issues. Therefore, it’s best to consult an experienced attorney before transferring assets.
Further, some assets, like life insurance policies, need to stay in individual names only due to their tax implications when held by trusts or estates. Instead, the trust may be a beneficiary. Again, talk to an experienced estate planning attorney so that transfers are done properly.
It will help to create a list of all your assets. Doing so can ensure that you’ll have the necessary documents prepared ahead of time. This may include deeds if transferring real estate or account change forms if retitling bank accounts.
Finally, keep track of all transfers and any assets you cannot retitle. Having detailed records documenting trust funds and which assets were transferred will help your trustee and beneficiaries with future trust accountings.
Planning for Bank Accounts
Typically, the first step is to reach out to your bank and ask what’s required to move your account into the Trust. The bank will walk you through what they need, often a “Certificate of Trust” form, which is like a summary of your full trust. Once provided, they can either change your account ownership or beneficiary to the trustee of the trust. Most banks can keep existing account numbers when changing ownership, but some may require new ones.
Be sure joint accounts are changed over correctly so both parties can access them if needed. Depending on who owns each account and how it is titled, you may need additional paperwork for this process.
Transferring Real Property
To title your real property into your Trust, a new deed reflecting the name of the Trust must be prepared and recorded with the county where the property is located. It’s critical that the deed is prepared correctly and in the name of your Trust on your death, or your property will need to go through probate to transfer to your heirs.
Additionally, once your home or real property is titled in the name of your Trust, notify your insurance company and ask whether any change in the policy is required. They may also want a copy of your “Certificate of Trust”.
Once you have recorded your new deed, you’ll receive an official for your own records.
Transferring Business Interests
Transferring business interests to a Trust should not be overlooked.
For partnerships and LLCs, transferring interests is typically done by signing an Assignment of Interest. This document says you are transferring your interest to the Trust. Before doing an Assignment of Interest, you should check the partnership or LLC operating agreement for potential transfer restrictions or requirements. Lastly, make sure the partnership or LLC updates its records with the Trust as the new owner of the interest.
Some businesses need special consideration before transferring your interest to the Trust, such as professional practices like medical offices and law firms. Those often have special rules regarding ownership changes due to licensing regulations in certain states and jurisdictions. Make sure you consult with an estate planning attorney before deciding how best to transfer these types of businesses into a trust account so that all applicable laws are followed correctly from start to finish.
Life Insurance
Funding a trust with life insurance is an effective way to ensure your estate planning goals are met. It can be especially beneficial if you have children who may not yet be ready to manage their own finances.
When it comes to life insurance, the focus is usually on where the proceeds go rather than who owns the policy. You can designate someone as a beneficiary (such as a spouse or child) and have them receive the proceeds directly, or you can name your trust as the beneficiary and have it manage the funds.
To do this, contact your life insurance carrier for the specific forms that need to be completed to update your beneficiary designations. They’ll provide instructions on what needs to be done and any additional information they require from you.
You may also want to consider naming your spouse as the primary beneficiary of your policy, with the trust listed as an alternate (or contingent) beneficiary in case something happens to them before you pass away. This ensures that there’s still protection for both parties involved, even if one isn’t around when it comes time to distribute assets from your estate plan.
Life insurance policies come in many different types and levels of coverage, so make sure you understand all aspects of yours before making any changes or updates to it and your beneficiaries. Of course, an experienced attorney can help guide you through this process.
Retirement Plans, IRAs, 401Ks
Instead of transferring ownership of your retirement plan to a trust, you may be able to designate a beneficiary who will receive the proceeds at your death. Designating a primary and alternate (contingent) beneficiary is common practice when dealing with retirement plans. Your spouse is usually named as the primary beneficiary, and then the trust becomes the alternate or contingent beneficiary. It’s best to consult with an estate planning attorney or tax advisor for advice on which option works best for you and your particular tax circumstances.
Each plan administrator has its own forms that must be filled out in order to update your designated beneficiaries, so contact them directly for more information about what’s required from you in order to do so. Make sure all paperwork is filed correctly and completely in order for everything to go smoothly after you pass away – mistakes here could cause delays or even legal issues down the line if not handled properly.
If done right, designating beneficiaries through retirement plans can help ensure that funds are distributed according to your wishes upon death without any unnecessary taxes or fees being taken out.
Next Steps after Funding a Trust
After you’ve funded your Trust, there are still a few things to remember. It’s important to stay up-to-date on any major asset changes and revisit your plan after any life changes.
If you purchase a new house or open a new bank account, consider taking the title directly in the name of the Trust – this could help you skip some steps. This helps ensure that your Trust stays funded and its terms continue to apply to all assets.
It’s also a good idea to review your plan every few years, even if nothing has changed in your life recently. That way, you can ensure that everything is still up-to-date and accurate.
Don’t forget: You don’t have to go through this process alone. Contact us anytime with questions or concerns about your estate planning needs. At Legacy Law Centers, we’re here for you and your loved ones.
Professional Assistance with Funding Your Trust in Virginia
When it comes to funding trusts, professional assistance can be invaluable. It is important to seek professional advice when creating a trust or making changes to an existing one. An experienced attorney can help you understand the legal requirements for setting up trusts in Virginia and advise you on tax implications and other considerations related to estate planning.
Types of Professionals Who Can Help
When looking for professionals who can assist with funding your trusts in Virginia, there are several options available: Attorneys specializing in estate planning law, certified public accountants (CPAs), financial advisors, and even some banks that offer trust services. Depending on what type of trust you’re establishing and its purpose, any of these professionals can provide guidance and support throughout the process.
At Legacy Law Centers, we pride ourselves on our ability to assemble a team of experts to address all aspects of your estate planning needs. Whether we work with your current advisors or connect you with new ones, our goal is to create a plan tailored to your unique circumstances.
Before engaging a professional for assistance with funding your trusts in Virginia, it is important to ask questions about their experience. Inquire about how long they have been practicing law or providing financial advice so that you can be sure they have sufficient knowledge of relevant regulations and applicable procedures. Finally, ensure that all parties involved understand each other’s roles during this process so everyone is clear on expectations from start to finish before signing any documents or agreements.
Trust Funding FAQs
What Does it Mean to Fund my Trust?
Funding a trust is the process of transferring assets into the trust.
This includes assets like real estate, investments, bank accounts, and other personal property that will be managed by the trustee according to the terms of your trust document. This is done by using documents like deeds, or naming beneficiary designations, to transfer ownership from one party to another. Finally, it may involve making changes to existing financial accounts so they can be managed within the framework of a trust agreement.
What Happens if my Trust is Not Funded?
If you have a Trust but fail to fund it by transferring your assets, you may be in for some unpleasant surprises. Without funding your trust, your assets will be subject to Probate upon your death. This means that the court system will get involved. It can take months or even years before everything is settled.
Not only does this mean more stress and expense for your heirs, but it also means that property may not go to the people you want it to. For example, suppose you are single with two kids named Jane and Nolan but have set up a trust saying that Jane gets everything. In contrast, Nolan gets nothing – without funding the trust. Those wishes won’t be followed as both children would receive an equal share under intestacy laws.
Failing to fund your trust can lead to costly delays and complications down the road. Therefore, it’s essential to take all necessary steps now to avoid any future headaches later on.
Can I avoid Probate With a Trust?
A trust is a legal document that allows you to transfer assets to your beneficiaries without going through the probate process. However, your Trust must be funded to avoid probate.
When setting up a trust, it’s important to understand what assets can be managed by your Trust and what cannot. Assets like real estate, stocks, bonds, and bank accounts can typically be funded into your Trust. Other assets, like life insurance policies or retirement accounts, may not be eligible.
It’s also important to note that some of your assets may still need to go through Probate in order for them to properly transfer. For example, any property held in joint tenancy with another person would require court approval before it could be transferred into the trust. An experienced estate planning attorney can provide more information on what assets can avoid Probate.
Finally, it’s essential that all paperwork related to funding your trust is completed correctly and timely so that everything goes smoothly when transferring ownership of your assets after death. Failure to do this could result in delays or complications down the road when trying to access funds from your account or transfer ownership of property held within the trust.
Conclusion
Overall, trust funding is an important part of estate planning in Virginia. It can be a complex process and it’s important to understand the laws and regulations that apply to your situation. Whether you have a revocable living trust or an irrevocable trust, professional assistance with funding your trust can help ensure that all of the necessary steps are taken correctly. With the right guidance, you can rest assured knowing that your wishes will be carried out according to plan.
Are you looking for an estate planning attorney to help fund your trust? Legacy Law Centers can provide expert guidance and assistance in navigating the complex legal process of creating a trust. We are dedicated to helping individuals protect their assets, plan for retirement, and ensure their wishes are fulfilled after they pass away.
Contact us today to learn more about how we can assist you with setting up your trust.