A living trust is a great way to manage your property while saving money on taxes. It also allows you to leave property to your loved ones without having to go through the hassle of probate. However, a living trust is useless unless you transfer assets and property to it.
While setting up a living trust is relatively simple, transferring assets to it can be a little tricky. Generally, there are two ways to fund your living trust: while you're alive through a title transfer, or when you pass away through a pour-over will.
Funding Your Trust Now
There are several procedures to fund a living trust. The method you use depends on the type of property or asset you'd like to transfer.
If the asset is something you have title to, you'll have to transfer title of the asset. These types of assets include automobiles; real estate; bank accounts; stocks and bonds; and non-IRA and non-401(k) investment and brokerage accounts. In order to transfer title, you'll have to change the name of the owner of the asset from yours to the name of the trustee.
Some assets don't carry a legal title. A good example is personal property like clothes, furniture, and jewelry. However, it also includes intangible interests, like intellectual property, royalties, ownership interests in partnerships or LLCs, and other forms of money owed to you. Since there's no title, you'll have to transfer your rights to the property to the trustee.
There's a slightly different procedure for assets to which you're a beneficiary. These include retirement accounts, life insurance, pension plans, and health savings accounts. In order to transfer these, you'll have to change the listed beneficiary to the name of the trustee.
Funding Your Trust After You're Gone
You can avoid much of the hassle of funding your living trust by setting up a pour-over will. When you die, all your assets not assigned to heirs, including all money, property, and benefits, will then "pour over" into the trust in accordance with your will. There are downsides to this approach, however. Your family won't be able to avoid probate and the accompanying expenses, as they would have had you funded the trust while you were living.
Next Steps: Free Case Review
Whether you are ready to set up that trust or want help funding an already established one, you should always know the law and how it may apply to your specific matter. You can get your questions answered and learn about avoiding the probate process by contacting a local estate planning attorney today. Get a free case review at no obligation.