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How Do I Fund a Trust?

Hi, I’m Eric Ridley from The Law Office of Eric Ridley in California, and I often get asked, “How do I fund a trust?” It sounds like a complex process, but it’s pretty straightforward. Let’s break it down into manageable steps. Remember, funding a trust is critical to making it effective – it’s like putting fuel in a car to make it run.

Understanding What ‘Funding a Trust’ Means

When we talk about ‘funding a trust,’ we’re essentially discussing moving your assets into the trust you’ve created. It’s a crucial step in ensuring that the belief functions as intended. Here’s a more detailed breakdown of what this process involves:

  1. Conceptualizing the Trust as a Container: Consider your trust an empty box or container. When it’s open, it could be more helpful. Its actual value comes into play when you start putting things into it. Similarly, a trust doesn’t offer much until you transfer your assets into it.
  2. Types of Assets You Can Put in a Trust: The term ‘assets’ encompasses a wide range of things you own. This can include tangible items like your home or car, financial assets like bank accounts and stocks, and intangible assets like rights to royalties or intellectual property. Each type of asset has its method of transfer into the trust. 
  3. The Purpose of Funding a Trust: Why do we fund trusts in the first place? The primary reason is to ensure these assets are managed and distributed according to your wishes, as the trust agreement outlines. This can be for various purposes such as asset protection, tax benefits, providing for dependents, or charitable giving. Funding a trust also helps avoid probate, the legal process of distributing a deceased person’s assets. Probate can be lengthy and costly, so you can streamline the process for your beneficiaries by having your assets in a trust.
  4. The Process of Transferring Assets: For real property, this involves creating and recording a new deed with the trust named as the owner. For bank accounts or investment accounts, you’ll typically need to provide your financial institution with a copy of the trust agreement and complete the required forms to change the ownership of the accounts. 
  5. Maintaining Control Over Transferred Assets: It’s essential to understand that transferring assets into a trust doesn’t mean you lose control over them, especially in the case of a revocable trust. You can still manage, invest, sell, or use these assets, now simply under the trust’s name.
  6. The Role of a Trustee: Once the trust is funded, the trustee (which can be you in a revocable trust) manages these assets. This involves responsibility for maintaining, investing, and eventually distributing the assets according to the terms you’ve set in the trust agreement.
  7. Regular Review and Updates: Funding a trust is not a one-time activity. As you acquire new assets over time, you must ensure they are added to the faith. Regularly reviewing and updating your trust ensures that all your purchases are covered.

Transferring Real Estate

If you own real estate, transferring it into your trust is essential. This means changing the title of your property from your name to the trust’s name. I help clients with the paperwork, ensuring everything is legally squared away. This step is crucial because it helps your family avoid the probate process in California, which can be time-consuming and expensive.

Personal Property with Titles

You should also consider transferring these into your trust for personal property like cars or boats with titles. This is especially important for high-value items. For personal property like art, jewelry, or other valuable items, prepare a document, often called an assignment of property, that formally transfers ownership to the trust.

Other Assets and Beneficiary Designations

Some assets, like retirement accounts or life insurance, don’t enter a trust as usual. Instead, you might update your beneficiary designations to include your trust. This ensures these assets are distributed according to your trust’s terms, giving you control over where they go after your passing.

Your Trust, Your Peace of Mind

Remember, a trust is only effective if it’s adequately funded. Overlooking this step can lead to unnecessary hassle and expenses for your loved ones. If you’re unsure how to fund your trust or want to ensure it’s done right, I’m here to help. I keep things simple, straightforward, and tailored to your unique situation. If you’d like to learn more, just reach out. I don’t bite, and your consultation is free. Call me today at (805) 307-7713 or contact me online for a free initial strategy session and get the help you deserve. Let’s ensure your trust is set up to protect your assets and provide for your loved ones effectively.

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Estate Planning Attorney Eric Ridley