Trust Funding

     Trust Funding is the process of placing your assets under the ownership and control of your Revocable Living Trust (RLT), and is a vital component of any RLT-based estate planning process. Only those assets that are titled in the name of your RLT (or that designate your RLT as beneficiary, where appropriate) will be controlled by the terms of your RLT. Otherwise your assets may be subject to probate, may lose valuable protection from estate taxes and may not pass to your beneficiaries as specified in your estate plan.

     There three fundamental steps in the Trust Funding process:
     #1 Identify 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?
     #2 Transfer ownership to your RLT: Once you have identified your assets, you can begin transferring ownership to your RLT by sending written notice to the various institutions. In that notice you will identify the asset, the name of your RLT and then request the change of ownership or beneficiary designation. Note: Do not be surprised if the institutions respond with a request for you to complete their own in-house forms.
     #3 Maintain your Trust Funding: As you acquire additional assets, be sure to take title to them in the name of your RLT or use the appropriate beneficiary designation from the outset.
     When funding your trust, some assets, such as real estate, life insurance and qualified retirement plans, require 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 RLT if 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 RLT. 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 RLT 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 trust. [Note: Because the death proceeds will be included in your estate for estate tax purposes, consideration should be given to establishing an Irrevocable Trust as owner and beneficiary to remove the proceeds from your estate, subject to certain rules.]
     Qualified Retirement Plans: There are many complex tax and non-tax consequences attending any beneficiary designation option you may select. Bottom line: Make decisions about these assets very carefully, and only after consulting qualified counsel.