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Monday, May 23, 2022

Funding Your Living Trust

A living trust as a legal construct in which assets can be stored for distribution at some point and under certain specified conditions to the trust beneficiaries. The trust is managed by the trustee according to the terms set forth in the trust document and for the benefit of the beneficiaries. Many people establish a living trust in order to avoid the probate process. Probate is the public, court-supervised process of administering a decedent’ estate. It can be time consuming and costly. The fact that it is a public process also means that there is little to no privacy afforded to the contents of the estate and how things are distributed.

A living trust can also be a great way to leave property to a minor so that it is safely stored until they reach the age of majority as well as an effective means of avoiding conservatorship in the event that a trustor becomes incapacitated. Whatever the reason for establishing a living trust, however, it must be properly funded to be effective. Only assets properly transferred into the trust will avoid probate and become a part of the trust corpus.

Funding Your Living Trust

Funding a trust is one of the initial steps in establishing a trust. Legal ownership of an asset must be transferred to the trust for the funding to be effectively accomplished. There is a broad range of assets that can be held in a trust. In fact, the majority of assets a person owns can be used to fund a trust. The more notable exception includes 401(k) plans. These types of assets, however, can be transferred outside of probate by naming a beneficiary. There are also assets, such as bank accounts, that may be transferred out of probate by transferring into trust ownership, but can also avoid probate by simply converting them to payable on death accounts and naming a beneficiary of the account.

Funding a trust will likely require paperwork. This means you should gather documents such as deed, titles, and other relevant ownership documentation for the assets you wish to transfer into the trust.

You may want to fund your trust with real estate. Oftentimes, real estate is among the most valuable thing a person owns. You can even transfer real estate into a trust if you owe money on it. If there is a loan or mortgage associated with the property, you do not need to notify the lender or take other steps to accommodate the loan. Notifying the lender, however, could help reduce the chance of any kind of confusion that may arise regarding the property later down the road.

You can even fund a trust with your interest in a small business. Different steps, however, will need to be taken depending on the type of business entity. A sole proprietorship, for instance, means that you should consider transferring the business’s name into the trust as well. This can help preserve the customer goodwill you have built up. With a partnership, you can transfer your partnership share into the living trust, however any existing partnership ownership certificate should be changed accordingly. Be sure to check the partnership agreement before transferring your interest into a trust as the agreement itself may prohibit such a transfer from occurring.

Estate Planning Attorney

To properly establish and fund your living trust, reach out to the dedicated estate planning team at Monk Law. Contact Monk Law today.


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