A trust does little good without trust funding.
You secured the services of an experienced estate planning attorney to create a trust.
Perhaps you wanted a trust for privacy purposes.
Maybe you needed to protect an inheritance for or from your heirs (or perhaps both!).
Perhaps avoiding probate was a priority.
According to a recent Kiplinger article titled “Once You Create a Living Trust, Don’t Forget to Fund It,” this type of estate plan requires trust funding to be effective.
Unfortunately, many people forget this crucial step of trust funding.
What do you need to do after the trust has been created?
Review your property deeds.
If you owned your home, vacation home, rental properties, or timeshares before the creation of your trust, these will be titled under your name, the name of your spouse, or both.
You would like the trust to govern and hold these properties.
To do this, you will need to retitle your deeds.
If you removed your trust from the deed when refinancing the mortgage, you will want to check to ensure that was retitled to your trust after the process.
Check your financial statements.
Many people prefer for financial accounts to be owned by the trust.
Review your brokerage statements, bank statements, and other financial accounts to confirm ownership under the trust.
If there is no mention of the trust on the account statements, you will likely need to contact the institution to make changes.
For accounts with beneficiary designations, discuss your goals with an experienced estate planning attorney before naming a trust as a beneficiary.
In some instances, it is better to name a person as a beneficiary rather than including this asset in your trust funding.
Look at IRAs and other retirement accounts.
You should consider the rules governing specific accounts when making choices on how to transfer these assets.
In some instances, making a trust a beneficiary could accelerate income taxes from the account.
It is also possible for a trust to make the distribution of assets to beneficiaries more challenging.
Why should someone make the trust a beneficiary of an IRA?
This option is appealing if you have a reckless heir, an heir with creditor problems, or a heir with special needs.
For example, Kansas law does not protect distributions directly to your children, but Missouri does.
Depending on your goals, you may only need a handful of assets in the trust.
Trust funding should align with your goals and specific circumstances.
Take action now to ensure your estate plan functions according to its intended design.
Reference: Kiplinger (Oct. 26, 2020) “Once You Create a Living Trust, Don’t Forget to Fund It”