What Does It Mean To Fund A Trust?

You may already know the benefits of a trust, or you may be considering using a trust as part of your estate planning strategy. But to have a trust, you have to fund the trust. What does that actually mean, and how would you go about doing that?

What is a Trust?

A trust is a legal entity that holds your property, and distributes it per your wishes—that is, the instructions that you leave for the trustee, who manages the trust.

But for a trust to distribute any property, it must actually own the property. That requires funding the trust, which is the actual act of ensuring that the trust owns the property that it is supposed to be managing or distributing.

Creating the Trust

The first and most obvious step is the creation of the trust document. This can be relatively easy, or it can be more complex, depending on what you’re trying to do, what’s being put into the trust, and the type of trust you are utilizing. There can also be tax consequences as well as asset protection consequences, to the kind of trust you set up and the wording of the trust, making this no small step in funding the trust.

Identify the Assets

The next step is to identify assets that qualify to be transferred into the trust. Sometimes this is easy, such as when the property is a specifically identified car or piece of personal property or even a business. Other times, this isn’t so easy. Imagine a trust that has to be funded with “a boat and all property related to the boat,” in which, “all property related to the boat” has to be specifically identified and named.

Certificates of ownership, such as with stocks or shares, will also need to be gathered and inventoried.

The Actual Transfers

After you have identified the property, the next hurdle is actually transferring the property.

In some cases, again, this is easy. Personal property has no title so the best practice would be to simply draft a separate document, expressing that the property is now owned by the trust. But for property that does have a title, like bank accounts or real estate or cars, the property has to be retitled into the name of the trust.

This can take some time and paperwork. For example, the proper deeds would need to be drafted and filed, for real estate to be transferred into a trust. If a business is being transferred, the corporate ownership documents with the state, as well as corporate documents, may have to be amended, to legally reflect the change in ownership.

If any property will be held by a separate institution—for example, funds in a bank—a separate bank account will have to be opened, to accept the funds and hold the funds in the name of the trust.

Setting up a trust can have huge benefits, but shouldn’t be done on your own. Call the Torrance probate will and estate attorneys at Samuel Ford Law today to start working on your estate plan.

Sources:

trustandwill.com/learn/how-to-fund-a-trust?srsltid=AfmBOooA0zP2073BhLoaEjLPeCzp-obOKvZ3DfT4tmaLtA1UgnIKw7aO

usbank.com/wealth-management/financial-perspectives/trust-and-estate-planning/how-to-set-up-a-trust.html