Funding a Living Trust — Estate Planning Advice
The most common reason for establishing a living trust is to avoid probate and take advantage of estate tax exemptions.
If you don’t have a revocable trust, your heirs could spend months or even years waiting for the California court to approve the administration of your assets, the payment of your debts, and the distribution of whatever is left of your money/property to your family, friends, charitable organizations or other heirs.
Properly executed Trusts avoid probate. Wills do not avoid probate.
A revocable trust simply means that your trust can be changed or even revoked whenever you like during your life; while a living trust means it goes into effect while you are still alive, unlike a Will, which is not effective until your death. A revocable living Trust avoids probate and can avoid a Conservatorship proceeding while you are living in the event you are unable to manage your own affairs.
Depending on the value of your estate and what type of assets you have, you will decide with your estate planning attorney whether or not the use of a revocable living trust is for you.
Upon executing your revocable living trust, you will need to “fund” your trust. Establishing the trust without putting your assets into the trust defeats the purpose of having a trust in the first place.
A Properly Funded Revocable Living Trust
Estate planning does not end with the execution of the trust document. You actually have to transfer title of your assets into the name of the trust (i.e., John Doe, Trustee of The John Doe Family Trust). If you leave an asset out of your trust, that asset could wind up going through probate.
So which assets should be used for funding a trust? Here are some important ones:
▪ Bank Accounts
▪ Brokerage Accounts
▪ Business Interests, i.e. professional corporations, partnerships, sole proprietorships, etc.
▪ Certificates of Deposit
▪ Life Insurance
▪ Real Property, i.e. home, land, commercial buildings, etc.
▪ Recreational and Other Vehicles, i.e. cars, motor homes, boats, planes, motorcyles, etc.
▪ Time Share Ownerships
*Note: Retirement assets, annuities and life insurance do not get transferred into your trust. You will work with your estate planning attorney to determine how to name the beneficiaries of these assets so that they are in alignment with your estate and tax planning objectives.
Let’s say you have a lot of assets, and are not sure where to begin when funding your trust. The first step is to make a complete list of all of your interests, property, and investments. You can check off items on this list as you start funding.
Next, I always recommend that my clients check their mail. Every time you get a monthly statement from your bank or brokerage company, make sure the name on your statement is listed with your name as Trustee of your Trust Name. If it isn’t, call that institution to get that particular asset transferred to your living trust, rather than leaving it in your individual name.
Your estate planning attorney will change the title to your real property by recording a Deed with the County. Your real property in other states should also be titled in the name of your trust so that these assets will not go through probate. You will save your heirs a lot of time, money and headaches by properly funding your trust, not to mention utilize all of the estate tax planning exemptions available.
If you have questions about how a particular asset should be handled, ask the professionals. Talk to your estate planning attorney or accountant.
Last, don’t forget to provide copies of your list to the Trustee, your accountant, and your attorney. Establishing a revocable living trust avoids probate court, but filing your list of assets and keeping good records will make handling your estate a lot easier for your beneficiaries.
Kira S. Masteller is a California Trust and Estate Planning Attorney. Call her at 818.990.2120 if you have questions regarding funding a trust, probate or estate planning for yourself or your business interests.