What is a Trust?
A Trust is a legal contract between a trust maker and a trustee. The Trust becomes active at the time of signing and is a wonderful and private tool for estate planning. We talk a lot about Trusts here, and we try to make it make as much sense as possible, but we get it! Trusts can be so confusing! But it’s easier to think about them in simpler terms.
A Trust agreement is like an empty box. It can hold a lot of things, but only if you put the things inside of it. Different types of assets require different things to get them inside the box.
So today we’ll take a closer look at them and hopefully make the concept of funding your trust make a lot more sense!
What do people put into a Trust?
There are many different kinds of assets that people put into Trusts. Each one of these types of assets requires different things to get them into that box that we talked about above. Here are some of the more popular items and assets people put into Trusts:
- Real estate
- Car / boat / RV
- IRA / Retirement account
- Personal property
- Bank accounts
How do you put assets into a trust?
So how do we get these assets into a Trust? Let’s look at each type of asset and unpack them.
Real estate is deeded to a person. So the Trust maker would need to transfer the deed of the property from themself to the trustee of their Trust.
Vehicles like cars, boats, and RVs all have titles. So, much like a deed, the Trust maker would need to transfer the title to the trustee of their Trust.
IRA and retirement accounts require paperwork with the financial institution transferring the accounts to trustee of the Trust. Often these financial institutions have their own documents they need completed.
Personal property is basically everything you own. Think about everything in your house, storage unit, etc. To transfer this property into your Trust you need to complete an Assignment of Personal Property.
Lastly, we have bank accounts. Much like an IRA or Retirement account, the financial institution will need you to complete paperwork transferring your accounts to your Trust.
A Fully Funded Trust
A fully funded Trust is a thing of beauty. When executed properly and perfectly it will keep your estate private and avoid the probate process. But it must be funded properly. When we say “funded properly” we mean that everything that is supposed to be in that box is in that box. The proper documentation, deeds, and assignments are in order. Titles to motor vehicles title them to the Trust. Everything is neatly in the Trust box and is therefore owned by the Trust. This is why it’s important to work closely with a skilled estate planning attorney like Sarah Siedentopf. She will walk through an audit of your assets and determine exactly what is needed to make sure your Trust is properly funded and everything is inside of it.
Additionally, if you already have established a Trust but need assistance transferring property into it, our office can determine what is already in the Trust, what isn’t, and what is needed to avoid probate.
What happens when things don’t make it in the trust?
A fully and perfectly funded Trust really is a thing of beauty. But when things that should be in the box don’t make it in the box there can be a lot of stress and hassle.
Say you die and a piece of real estate is outside the Trust. This means that real estate must go through probate and then the Court will distribute it into the Trust— so long as your Will allows for that. For many, the whole point of a Trust is to avoid probate. So you can see how this is a major problem.
This is one of the reasons we recommend an audit of your estate plan each year. By sitting down and reviewing everything at least once a year you will catch things you may have missed otherwise. Perhaps you purchased a new vehicle or opened a new bank account and accidentally put them in your name, rather that the trustee of your Trust’s. This yearly review will catch anything that may be outside your trust.
As always, we recommend working closely with an estate planning attorney for your estate planning needs. We would love to work with you. Call us to schedule a consult.
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