A Revocable Living Trust must be funded to work properly. Unlike a will, it's not enough for the Trustor (the creator of the trust) to merely create the trust. An unfunded trust is like a car without gas – it’s nice to have, but it won’t get you anywhere. A Trustor “funds” a trust by transferring individual or joint assets into the trust.
There are different ways to fund a trust, but for this post, I will discuss only three.
1. Retitle the Asset – Change of Ownership
This method is typically used for non-retirement assets such as checking and savings accounts, brokerage accounts, and real estate to name a few. Changing the owner from the Trustor’s name into the name of the trust properly funds these types of assets into the trust.
2. Transfer by Assignment
Assignments are generally used for assets without legal title such as jewelry, art collections, tools, etc. A typical assignment conveys all of a person’s right, title and interest in a particular asset to the trust. Although not the best option, assignments may also be used to transfer ownership in business interests such as a partnership interest or a membership interest in an LLC.
3. Change of Beneficiary
This method is reserved for retirement accounts, such as a 401(k) or an IRA, as well as annuities, life insurance, and health savings plans. Unlike non-retirement accounts, these assets do not get retitled to the trust; rather, the beneficiary designations are changed to the trust.
If you have questions about how to properly fund your trust, contact Morris Hall to set up a free consultation.
Contributed by MH Phoenix Estate Planning Attorney, Darren Richardson.
About Morris Hall:
At Morris Hall, we have focused our legal practice on estate planning for over 40 years. Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects. We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead. Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.