Your estate planning attorney and/or financial advisor should provide you with advice and guidance on how to properly fund your Trust. Any comprehensive estate plan not only includes the legal documents, but a discussion about trust funding, beneficiary designations and asset titles.
One of the primary benefits of a Revocable Trust is the passage of assets to your beneficiaries (under the terms and conditions you outlined in the Trust itself) without the delays and expense of probate. However, in order to avoid the probate process, the Trust must be funded.
This means that any asset you want to put into your Trust needs an updated title. For example, title to real estate can be updated by executing a deed conveying legal title of the real estate to the Trustee of your Revocable Trust. The title to financial accounts (other than qualified retirement plan accounts, like IRAs and 401(k)s) can be updated to add the Trust as an owner of the account. Stocks, bonds and mutual funds can also be titled in the name of the Revocable Trust. Depedning upon existing shareholder agreements or operating agrements, ownership interests in closely held businesses may also be assigned to your Trust. Revocable Trusts are so-called “grantor trusts” meaning that any income flows through to be reported on the grantor’s income tax return and therefore, in most cases, any account in the name of the Trust maintains the grantor’s social security number for taxpayer identification purposes.
Any untitled assets, including most personal belongings, household furnishings, collections, jewelry, and artwork, can be placed in the Trust with a simple “instrument of transfer.”
You should also review the beneficiary designations on your qualified retirement accounts and life insurance policies to confirm that those designations are consistent with your wishes and terms of your estate plan.
By properly funding your Revocable Trust, your heirs will not have to ensure the burdens of probating your assets after your death, which, in many cases, leads to much smoother and less costly administration of your estate.
