Did you know that you are able to fund a trust with a variety of different asset types? It’s true! You can use cash to fund a trust. You can use securities to fund a trust. Life insurance proceeds can also be held in trust as can real property. In fact, pretty much any type of asset can be used to fund a trust. If you have out of state property, however, you may still be wondering whether you can fund your trust with it.
Funding Your Trust With Out of State Property
Yes, you can fund a trust with out of state property. All 50 states recognize the validity of a trust that was properly executed in another state. This means that all you need to do is take the right steps to effectively transfer your out of state property into the trust. Whether the out of state property includes a home or just land, the deed to the property will need to be transferred into the trust. Assigning ownership rights to the property by changing the title or ownership of the property to the name of the trust will be necessary to fund the trust with your out of state property. Real property can be transferred via a warranty deed or a quitclaim deed. A warranty deed will come with the guarantee that the person who sold the property has the title free and clear. This means that there are no existing liens or encumbrances on the property.
With many people owning out of state property, the prospect of being able to fund a trust with that out of state property can be appealing. One of the big benefits of trusts that is pretty well known is the fact that a trust can provide a means of circumventing the probate process. Assets held in a trust will fall outside of the testator’s probate estate and, thus, avoid the long, expensive, and arduous probate process. What is not as well known, however, is that the out-of- state property of the testator is likely to have to go through an ancillary probate in the state in which it is located. This means that the estate may have to go through multiple probate processes. If you fund your trust with your out of state property, however, it will avoid ancillary probate.
There are some big benefits to establishing a trust and added benefits to funding your trust with out of state property. Before you do so, however, there are a number of considerations of which you should be mindful. First, be aware of what kind of trust to which you are transferring the property. An irrevocable trust will mean that you will not be able to get that property back from the trust should your situation change down the road. Second, take a look at the potential tax consequences of transferring property into the trust. Such a transfer may trigger something like capital gains taxes.
Estate Planning Attorney
Do you have out-of-state property? At Monk Law, we can design a comprehensive estate plan that takes all of your property, in state and out of state, into account. Contact Monk Law today.