Funding your revocable trust is just as important as creating it. However, many people don’t know what funding a trust means.
Funding a trust is accomplished by retitling assets into the trust’s name rather than your own. Incorrectly funding a trust can become very problematic.
Consequences of not re-titling assets:
There are a variety of reasons why we require and help our clients retitle their assets into the trust’s name. Here are three reasons that you should retitle your assets:
1. Your assets may be subject to probate if they are not retitled. Probate is the legal
process by which assets are distributed after death. It is best to avoid probate because it can be time consuming and expensive. And if your assets are owned by your trust and not you, they do not need to go through this process in order to be dispersed.
2. It makes the administration much simpler. When assets are already “owned” by the trust by retitling, there is less room for confusion about asset ownership and distribution.
3. Retitling can help protect your assets from lawsuits, creditors, and people you may wish to keep away from your assets.
The whole point of creating a trust is to make a plan for how your belongings will be handled. But, if they are not correctly titled in the name of the trust, the plan you so carefully created flies straight out the window.
What assets need to be retitled:
A revocable living trust protects your assets and determines who your assets will go to once disbursements are made. To begin creating a revocable living trust, think about what assets you have and who you want to leave them to. As we’ve said, retitling your is a crucial step in creating a trust because it effectively transfers ownership of the asset to the trust. Titling, as a legal term, identifies who owns an asset. When it comes time to disburse the trust’s assets the trust has the power to give out the assets it “owns.”
Certain assets must be retitled in order to pass out of your possession and into your trust. These include:
Bank accounts
Retirement accounts
Life insurance
Health insurance
Investment accounts
Real estate
Vehicles
We would be happy to help you determine if your assets need to be retitled, because chances are, they do.
How to retitle assets:
Funding a revocable living trust involves transferring assets from the trustor, or the creator of the trust’s individual name to the name of the trust. This means literally changing the names on your assets from your name into the name of the trust.
Retitling assets is a straightforward process. However, it does differ from asset to asset.
For real estate, retitling involves a deed. For example, if you own a home, the home is currently deeded in your name, even if there is a valid mortgage. In order to change the title of your house, deed it from yourself and into the trust. This can be achieved through a Warranty Deed or a Quitclaim Deed. The deed must then be signed, notarized, and recorded in the county where you live.
To retitle a bank/ retirement/ investment/ insurance account, simply contact the bank or institution that holds the asset and request a change in ownership from your name to the trust’s name. You can also request that the Trust be designated as the account’s pay on death beneficiary if you would like to retain ownership of said account while you are still living. We should note that the institution that manages your asset may require documentation stating that you are trustee of the trust.
Correctly funding your revocable living trust by retitling your assets is the only way to ensure that you are correctly passing ownership and into the ownership of your trust. We want to help you understand how best to protect your assets for smooth and effective administration.
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