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Funding Your Trust – Don’t Forget to Fund It
What is Trust Funding? Funding a trust typically means moving the ownership of assets from your own name or joint names into the ownership of your trust. Then, and usually, only then, will the assets avoid probate, that process, and costs, and be managed as the trust directs.
When funding a trust, don’t forget to update your beneficiary designations elsewhere. Assets with beneficiary designations, such as life insurance policies and retirement accounts, should be appropriately updated to reflect the trust as the beneficiary. Failure to update these designations can result in unintended consequences, such as bypassing the trust and its distribution provisions. Your IRA beneficiary designation supersedes your will or trust provisions.
It’s not hard to forget also moving your real estate to your trust as well, if your attorney advises. Speak to your attorney first for advice on all these potential moves. Transferring real estate to a trust typically requires executing a new deed. Many individuals overlook this step, leaving real estate outside the trust and subject to probate. Consult a real estate attorney to properly execute the necessary documents.
Tangible personal property, such as artwork, jewelry, or collectibles, are often overlooked when funding a trust. Ensure these assets are also addressed in your trust and properly transferred to the trust’s ownership if desired or advisable.
Funding a trust is a crucial part of the estate planning process, ensuring that your assets are managed and distributed according to your wishes. It is good to realize that your trust will only control the assets that your trust owns, or that are directed to the trust during your lifetime or at death. Your will controls assets not left to a beneficiary, that don’t move to the heir because of how it is owned, or assets that are otherwise orphaned assets when you die. By understanding the funding process and avoiding common mistakes, you can maximize the effectiveness of your trust and provide a solid foundation for the protection and distribution of your wealth. Seek out an attorney to navigate the intricacies of trust funding and tailor it to your specific needs. We’re glad to recommend a few names in your area if you need help deciding. A call to your advisor(s) may be very well timed to ask how your assets are owned, and how they might transfer to your intended heirs. Always seek the advice of suitable counsel before making these moves.
This article is written by Eric W. Johnston, CFP®, Financial Advisor and President of InFocus Financial Advisors Inc whose firm focuses on the needs of people in retirement. He can be reached at 410-677-4848 or [email protected] for questions or comments. His website is www.retireinfocus.com.
Investment Advisor Representative offering securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker dealer, and a Registered Investment Adviser. Cetera is under separate ownership from any other named entity.