How to Fund a Living Trust

By Beverly Bird

All the benefits of creating a living trust become void if you don’t fund it. Assets not placed in the trust will not avoid probate. If you don’t also have a will, your state’s laws determine which of your heirs gets your property and in what percentages. Funding your trust, or transferring your property into it, is time-consuming and involves a lot of detail work.

All the benefits of creating a living trust become void if you don’t fund it. Assets not placed in the trust will not avoid probate. If you don’t also have a will, your state’s laws determine which of your heirs gets your property and in what percentages. Funding your trust, or transferring your property into it, is time-consuming and involves a lot of detail work.

Step 1

Create a comprehensive list of your assets and decide which of them you want to place in your trust. Some assets, such as retirement accounts or certificates of deposit, might incur penalties or unwanted tax ramifications if you transfer them. If you have any questions about a particular asset, confer with a professional.

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Step 2

Contact your mortgage holder if there is a lien against real estate you want to move to your trust. Also, Check your mortgage documents and ensure that there is no acceleration of mortgage due to the transfer. Some mortgage documents include clauses that allow the lender to call the loan due if you transfer title. Others require that you have their consent.

Step 3

Prepare deeds to transfer your real estate and record them with the clerk in the county where each property is located. You can use warranty deeds, attesting that you have clear title to the property you’re giving your trust, or a quitclaim deed, which makes no such warranties. If your trust later wants to sell your property, the buyer might be wary of a quitclaim deed, so speak with a professional if you’re unsure which to use.

Step 4

Visit all financial institutions where you have accounts. The method you use to transfer title will depend on the practices of each particular bank. Some will allow you to simply change the name on the account. Others might require you to close each account and open new ones in the name of your trust.

Step 5

Contact the Department of the Treasury Bureau of Public Debt if you have U.S. savings bonds you'd like to transfer. This generally involves completing and signing Form PD F 1851 E. You must sign the form for the transfer in the presence of a certified bank employee; the DOT can tell you to where to find one in your area. For publicly-traded stocks and bonds, check your certificates for the name of the transfer agent. Contact the agent for instructions as to how to move each into the name of your trust.

Step 6

Change the beneficiaries on your life insurance policies to reflect that your trust should receive the death benefits instead. This is only necessary if you want your trust to apportion the funds among several beneficiaries, or hold onto the money and distribute it in yearly increments. Life insurance policies with named beneficiaries do not pass through probate.

Step 7

Visit the Department of Motor Vehicles to transfer title to your automobiles. The DMV will provide you with a simple form to fill out to change title. Depending on your state’s laws, you might also incur sales tax or new registration fees when you do this, so check with a professional to find out if it’s worth it to make the transfer.

Step 8

Create bills of sale or deeds of gift for any items of personal property you want to transfer to your trust. If you use a bill of sale, you can make the transfer for a nominal amount, such as $5. The important thing is to create a paper trail of ownership so these items are clearly part of your trust and can avoid probate.

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References

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How to Distribute the Assets of a Living Trust After Death

Closing a trust after the grantor’s death is much like probating his will. When a decedent leaves a will, he names an executor to gather his assets and disperse them to his named beneficiaries. When he leaves a trust, the person he names as successor trustee does the same thing. The major difference is that a well-planned trust does not have to pay the decedent’s debts first. They’re usually paid by his probate estate from the cash and assets he did not transfer to his trust during his lifetime.

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Your irrevocable trust is a permanent agreement that describes how your trust assets are managed, identifies who receives the trust's contents and appoints someone to oversee the trust –– known as the "trustee". You can't directly transfer an IRA account to your trust during your lifetime, but you can name the irrevocable trust as the IRA's beneficiary when you die. In this way, the entire account balance that would normally pass to your beneficiaries as lump sum, and on which they would have to pay taxes, goes, instead, to the irrevocable trust. IRS rules allow the beneficiary to take minimal annual distributions from the trust. These distributions continue over the expected lifespan of the oldest beneficiary of your trust, thus lowering, and sometimes eliminating, taxes.

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