Trust Funding 101: What It Means and How to Do It Right

Creating a revocable living trust is a powerful step in protecting your legacy, avoiding probate, and planning for incapacity. But creating the trust is only half the job—you must fund your trust to make it effective. Think of your trust like a suitcase: unless you fill it with your belongings (your assets), it won’t do much good. Trust funding is highly personalized and often requires advice specific to your situation. This post will give you an overview of the basics

of trust funding, but you should seek the advice of your attorney. At The Toups Law Firm, we believe strongly that drafting your trust is only the beginning. We offer trust funding support for all our trust plans to make sure your plan works the way you need it to.

Why Trust Funding Matters

To get the maximum benefit from your revocable living trust, it needs to be properly funded during your lifetime. That means transferring ownership of your assets into the trust, or naming the trust as a beneficiary of certain assets. Assets owned by your trust should reflect the trustee’s name and the trust itself. Your financial institution may shorten this—just ensure the trust name and trustee(s) are clear.

Real Estate

Real property should be transferred into your trust by a deed. If your trust is drafted properly, you can maintain your homestead exemption when you transfer your home into your trust. However, you will need to complete a new homestead exemption. For properties that are mortgaged, Federal law protects residential property transfers into a revocable trust from triggering “due on sale” clauses.

Mineral Interests

Minerals must also be transferred into your trust by a deed. Additionally, if your interests are producing, you will need to work with the leasing company to start issuing the checks in the name of the trust.

Vehicles

Cars may be titled in your trust, though many grantors only choose to title cars into their trust when they plan to own the car for a long time (like collector cars), or when the beneficiaries of their trust are minors or special needs beneficiaries. Alternatives to titling your car in the trust are using the survivorship agreement on the title or beneficiary designation form through the DMV.

Bank Accounts, Stocks, Bonds, and Other Financial Assets

Retitling accounts to the trust is the best option, though naming the trust as a beneficiary is acceptable in some cases. We often recommend a mix for convenience purposes.

Retirement Accounts

Retirement accounts cannot be owned by the trust. Depending on the beneficiaries of your trust and the goals of your trust, you may choose to name individuals as outright beneficiaries or name the trust as the beneficiary. If you choose to name the trust as the beneficiary of a retirement account, it is critical that the trust has been properly drafted for that to avoid poor tax outcomes.

Life Insurance

Whether to transfer your life insurance policy ownership into the trust and whether to make the trust the beneficiary depends on your beneficiaries and the goals of your trust.

Personal Property

It’s important to plan for your personal property, such as jewelry, tools, cookware, furniture, china, and more. We prepare an assignment of tangible property to transfer all your tangible property into your trust as part of our trust plans. We also work with our clients to develop a plan, if desired, for their personal items. Often it is these items, with the least monetary value, that hold the most sentimental value. It’s important to plan for these, too.

Keeping Your Trust Funded Over Time

Trust funding is not a one-time task. We recommend choosing an annual check-in date. During your check-in, your should review new accounts or property purchases, schedule a meeting with your financial advisor and maybe your attorney as well. We’re here to help. Trust funding can feel overwhelming, but you don’t have to do it alone. Reach out to The Toups Law Firm anytime you need guidance—we’re honored to help protect your legacy.