Estate Planning For The Long Run

Estate Planning For The Long Run

How can you move assets into a revocable living trust?

by | Feb 9, 2023 | Estate Planning

Most of us will benefit from having a revocable trust in place. This type of trust will ensure that upon our incapacity or death, our assets will be efficiently managed and administered by the right people and benefit the right people. However, simply having an executed trust is not enough by itself for the trust to work as intended. Equally as important in establishing a trust is to make sure the trust is funded. Funding a trust refers to the process of transferring and titling assets into the name of the trust.

A trust can own almost any type of asset. The funding process is different depending on the type of asset being transferred to the trust. For example, any type of personal bank account or brokerage account can be retitled in the name of the trust by providing trust documentation to the institution and having the institution change the name of the owner on the account. For real property, you need to record a new deed where the ownership of the real property vests in the name of the trust. There are similar procedures for other types of assets.

Funding the trust is important because if certain assets are not transferred to the trust, then those assets may require more time and expense to administer when someone dies, such as a probate administration. Furthermore, the assets may be more difficult to manage upon the incapacity of the owner. By way of analogy, a trust that is not funded is like a toolbox with no tools in it.

Some assets might not be moved to the trust

Not all assets are treated the same when it comes to funding the trust. For example, the ownership of a 401(k) or an IRA typically cannot be changed from you as an individual into the name of your trust. Rather, you have to name beneficiaries to receive those types of accounts upon your death. This is accomplished by filling out a beneficiary form or designation on the 401(k) or IRA, to ensure that when you die, the people you want will receive those funds. A trust can be the beneficiary of a 401(k) or IRA, the same as an individual, but so naming the trust may or may not be the best option. Thus, it is not only important to focus on the assets going into the trust, but also the rest of the assets that might not go into the trust. Otherwise, your assets may not be distributed to the people you want, or in the way that you want.

For those of you who have a trust in place, it is important that you consult with a competent estate planning attorney to make sure that your trust is properly funded and that your other assets are also properly titled or have the right beneficiaries designated.