Living Trust and Estate Planning Paperwork and Pen on a DeskYou deserve to feel a sense of accomplishment when you have finalized your Estate Planning paperwork with your attorney. After years of procrastination, months of researching law firms, sleepless nights contemplating your own demise, and hours talking over options with your spouse, you have finally crossed all the t’s and dotted all the i’s on your Estate Planning documents.

You now have a Will that lays out all of your wishes, Powers of Attorney in case you become incapacitated, and trusted representatives lined up to implement your plan if it becomes necessary. However, if a Revocable Living Trust is part of your Estate Plan—and for most people, it should be!—you are not done yet. As your lawyer will clearly tell you at your signing meeting, you still have to take some steps to fund your Trust. We explain what that means here.

How Does a Trust Work?

First, the basics. A Trust is a legal entity that can own assets. It is not a bank account or safety deposit box that literally holds money or deeds or titles, but it can become the owner or beneficiary of bank accounts, real estate property, vehicles, retirement accounts, and any other assets. Once your attorney has created the Trust, you will have the legal name to use as the new owner of your assets.

With a Revocable Living Trust, you and your spouse will be the Trustees, meaning you still have full control over everything in the Trust. You will also name a successor Trustee who will follow the instructions you have left when you pass away. The assets held by the Trust will not have to pass through Probate. Instead, they will be distributed to the beneficiaries you have named according to your wishes.

How Is a Trust Funded?

To fund a Trust simply means to make the Trust the owner or the beneficiary of the assets you want it to protect. Your Estate Planning attorney will explain which accounts and assets can be moved into the Trust and how to go about it. They will give you a document called a Certificate of Trust that you can use to prove the Trust’s existence. In general, you will want to transfer:

  • Bank accounts. Your savings, checking, money market, and credit union accounts should go into the Trust by either changing the name on the account to the name of the Trust or by naming the Trust as the pay-on-death beneficiary. Your attorney and your financial institution can help you determine which is the best way to do this, but either way, you will need to make a trip to the bank to make the change.
  • Valuable vehicles. Any titled property, such as vehicles and farm equipment, should be retitled in the name of the Trust. You will probably do this at the Department of Motor Vehicles.
  • Real estate property. You will need new deeds for the family home and any vacation properties you own that name the Trust as the owner. This can be done through your county clerk’s office.
  • Retirement accounts. For retirement accounts such as IRAs and 401Ks, you will have to name the Trust as the beneficiary so that the funds will go into the Trust upon your death.
  • Life insurance policies. If you do not want your beneficiaries to receive the entirety of your life insurance coverage at once, you can name the Trust as the beneficiary and instruct the Trustee as to how to distribute the funds.

This is just a brief overview of how to make sure your assets are protected by your new Trust. The exact steps you will have to take will depend on your assets and how you want your heirs to receive them. The important takeaway here is that you should not put off this important task. As we know, life—and death—are unpredictable, and it would be devastating if you went to the trouble and expense of establishing a Trust and all of your assets had to go through Probate anyway because you did not fund the Trust.

Brad Crayne
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Brad Crayne helps clients in TX and AR with estate planning, asset protection, probate, and medicaid planning.