Q: You keep writing about funding the trust. How do you fund a trust or even know if it is funded?
A: Creating a trust is a major step toward a complete estate plan. It’s only the first step but it is the most important one.
The next thing you need to do is fund the trust. Think of it as a box that you created. The box by itself is functional but it doesn’t meet its full potential until you put something in it. Funding the trust is like putting stuff in the box.
Attorneys who prepare a lot of trusts will take care of the real estate for you. The attorney will prepare a deed or deed in trust. The deed transfers title to the real estate into the trust. The end result is that title is transferred from Jane Doe to Jane Doe as Trustee of the Jane Doe Revocable Trust. Once recorded, the real estate is funded into the trust.
Remember that title has transferred, so you should check with the county auditor’s office to see if you need to re-file for your real estate tax exemptions. It’s also a good idea to contact your insurance agent.
Most attorneys will also assist you in transferring the personal property such as your furniture, appliances, clothing and collectables into the trust. I use an assignment but some attorneys use a bill of sale or something similar. The assignment makes it clear that you are transferring title to your property to the trust.
An assignment should only be used for things that don’t have a title of some sort. You shouldn’t rely on an assignment to transfer stocks, cars and other things that have a form demonstrating ownership.
For things like bank accounts, you simply go to the bank with the certificate of trust or affidavit of trust and tell them that you need to transfer the accounts into your trust. New signature cards will be issued and you will need to sign them as trustee for the trust.
Brokerage accounts, investment accounts, individual securities and bonds also need to be transferred into the trust. Usually this is a fairly simple process that your broker or investment advisor takes the lead on.
Other assets need to go through a similar process. A lot of attorneys provide a list of funding instructions for the most common assets. More unusual assets may take assistance from the attorney or other advisor.
The end result is that your stuff needs to be titled in the name of the trust. If you fail to properly fund the trust, the pour-over will should get your stuff into the trust after your death.
However, if you rely on the pour-over will, you likely defeated one of the main benefits of creating a trust: probate avoidance.