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Trust Funding

    Trust funding (also known as asset-titling) is the process of placing your assets under the ownership and control of your Revocable Living Trust (Living Trust). It is a vital component of any Living Trust-based estate planning process. Only those assets that are titled in the name of your Living Trust (or that designate your Living Trust as beneficiary, where appropriate) will be controlled by the terms of your Living Trust. Otherwise your assets may be subject to Probate Court, may lose valuable protection from taxes and may not pass to your beneficiaries as specified in your estate plan.
There are three fundamental steps in the Trust Funding process:
     Identify all of your assets by:
     Type: For example, is this asset a bond certificate, a certificate of deposit, or a publicly-traded stock certificate?
     Value: How much is it worth and is it encumbered by debt?
     Ownership: Do you own it individually or jointly with a spouse or others?
     Transfer ownership to your Living Trust:
     Once you have identified your assets, you can begin transferring ownership to your Living Trust by sending written notice to the various institutions involved. In that notice you identify the asset, the name of your Living Trust and then request the change of ownership or beneficiary designation. Note: Do not be surprised if they respond with a request for completion of their own in-house form.
     Maintain your Trust Funding:
     As you acquire additional assets, be sure to title them in the name of your Living Trust or use the appropriate beneficiary designation from the outset.
     Here is a review of some assets requiring special attention:

Real Estate

     Your Personal Residence: Even if there is a mortgage against your residence, federal law (The Garn-St. Germain Depository Institutions Act of 1982) allows you to transfer your residence to your Living Trust when the loan is federally-backed.
     Other Real Estate: If you have debt against any other type of real estate, first contact the lender to obtain permission to transfer ownership to your Living Trust. The federal law protecting transfer of your personal residence does not extend to your investment real estate. Failure to obtain prior approval could result in an acceleration of payments.

Beneficiary Designations

     Life Insurance: If you name your Living Trust as the beneficiary of all of your existing and future life insurance policies, then the proceeds will be administered and distributed according to the terms of your Living Trust.
     [Note: Because the death proceeds will be included in the value of your estate, consider establishing an Irrevocable Trust as owner and beneficiary.]
     Qualified Retirement Plans: There are many complex tax and non-tax consequences attending any beneficiary designation option you may select.
Bottom line: Make no decision without appropriate legal counsel. One mistake could spell disaster!