Depending on the situation, a trust may be an important piece of one’s estate plan. However, a common misconception is that once a trust is created, the job is done. In reality, creating a trust is just the beginning. A trust, and the provisions that govern its assets, are rendered ineffective if the assets are never put into the trust in the first place.
Unlike a will which is a statement of one’s last wishes, a trust is its own separate entity. This is important for two reasons: (1) A trust can take effect once it is fully executed. It is a living document; and (2) A trust has the ability to own assets. This differs greatly from a will, which does not take effect until the person who created that will dies, and it has no ability to own assets because a will is merely a written statement.
Determining that a trust makes sense for someone’s estate plan requires that they know what assets they have, and that they have a plan for which ones will be placed into the trust. Once those questions have been answered, then the necessary steps can be taken to actually fund the trust.
There are a couple of ways to fund a trust. One way is to take steps to make sure an asset moves into the trust at your death. This can be done by naming your trust as beneficiary. This strategy can be utilized with most financial accounts and life insurance policies. Upon your passing, the specific financial account or life insurance policy would move directly into the trust.
The second way to fund the trust is during your lifetime. This can be done with almost any asset you own. The basic way to describe this is by changing the title of any asset you own, from your name into the name of your trust. The following are the more common assets that are placed into trusts:
Real Estate (Primary homes, vacation homes, vacant land, etc.) – To place real estate into a trust the owner of the real estate would need to sign a deed transferring title to the real estate from that specific owner, over to the trust.
Financial Accounts (Investment Accounts, Bank Accounts, Life Insurance Policies, etc.) – For any financial account to be moved into a trust, the owner of the account would needto contact the company/ bank they have the account with, and ask for a change of ownership form so that they can name the trust as the new owner of the account.
Our team is ready and able to help with any existing trusts and questions you may have. Or if you have questions on how they may work, reach out to our Trust and Estates Team at 518-631-6400.
Written By: David Troiano