Modern Estate Planning Blog

If you have created a trust, you have already achieved a huge accomplishment in getting your ducks in a row and ensuring peace of mind for you and your loved ones. 

However, the creation of your trust is really only the first step in securing your finances for the future. Your trust will not be able to help you the way you want it to if it isn’t funded.

An unfunded trust may create the need to go to the probate court in the event that you become incapacitated or pass away. 

What does it mean to “fund” your trust? It means ensuring that your trust owns your property and accounts, instead of you as an individual. How to fund the property depends on the type of property.

Think of your trust as a car. To run a car, you need gas so it can keep running and take you where you need to go. Your assets (real estate, bank accounts, investments, etc.) are the gas that runs your trust.

Funding is critically important, as it ensures your family does not run into future problems if you become incapacitated or after you pass. 

If you do not have your assets in your trust, it can cause serious complications for your trustee and your family. Simply listing the asset, the bank account, or the property on the trust schedule, does not mean that your trust owns it yet.

Fueling Your Trust: The 6 Most Common Types Of Assets

1. Bank Accounts

You can make your trust the owner of your bank accounts by going in person or completing the process online. If you decide to visit in-person, make an appointment in advance with either the account or branch manager. 

It is important to bring your certification of trust, personal ID, and social security number for the bank to complete the necessary paperwork. Be sure to ask for a copy of the paperwork that was completed - this will provide written confirmation that the changes were made.

2. Real Estate

The goal here is to make the trust the owner of all the real estate you own, including your home, vacation home, and any other real property you own. 

To change the owner of real estate, a deed must be created that transfers the ownership from you to the trustee of your trust. This deed must be signed by you, it must be notarized, and it needs to be recorded by the county recorder’s office. 

At The Chubb Law Firm, our trust packages include creating two deeds, so you can easily transfer your real estate. 

3. Investment Accounts (non-Retirement)

These include your brokerage accounts with your stocks, bonds, and equities. 

When it comes to a brokerage account, contact your financial advisor from the brokerage company and communicate you want the trust to be the owner of the investment account. You will have to do some paperwork - it’s important to make sure all the details match and everything is correct. 

When implemented correctly, your new statements will arrive in the name of the trust, instead of your own. 

Many companies now allow you to make an online account, giving you instant access - and you might even be able to do the paperwork yourself online. 

4. Life Insurance & Annuities

Life insurance and annuities will remain in your name, but your trust will be the beneficiary.  You will need to contact the insurance company (or your financial advisor) to gather the beneficiary change form for each policy. Occasionally you may want a policy to be the owner, but this will depend on your planning goals.

For life insurance, instead of your spouse being the primary beneficiary, it’s recommended that your trust become the primary beneficiary. This will ensure you’ll be able to get the full benefits of your planning. 

For annuities, generally (due to options available only to a spouse) your spouse can remain the primary beneficiary with the trust as a backup or contingent beneficiary. There may be times when your planning goals dictate that the trust should be the primary beneficiary.

5. Retirement Accounts

Your retirement accounts may contain the majority of your wealth, so it should be carefully coordinated with your plan, as well. 

These accounts have special tax implications. It is recommended that spouses become your primary beneficiary, as they have other benefits that non-spouse beneficiaries don’t have. 

Your trust can be your backup beneficiary. Your children can also be the backup beneficiary as long as it is coordinated with the rest of your plan. These are all important factors to consider when you are planning your trust and estate plan, and should be discussed with your attorney.

6. Business Entities

If you own business entities - corporations, limited liability companies (LLC), or a business partnership - you want to ensure your share is owned by your trust.

In the case of a corporation, your shares in the company will be owned by the trust. In the case of an LLC, it will be your membership units. In the case of a partnership, you would assign your interest to the trust. 

Sometimes it is not possible for the trust to be the owner of business assets. For instance, if you are a professional such as an attorney, doctor, or dentist, shares of a professional corporation may only be owned by the licensed professional. There may also be limitations on ownership transfers associated with your particular company, which can be found in the corporate bylaws or membership agreement. In such cases, transferring and protecting your ownership will not be as simple and you should consult with a knowledgeable attorney. 

Need Help?

If you need help setting up or funding your trust, call The Chubb Law Firm at (916) 241-9661 to schedule a Discovery Call where we will review your goals and discuss your options.