The idea of having a living trust to take care of assets when you pass away is growing in popularity, but not many people realize the little details that go into properly utilizing a trust. Your attorney can sit down with you and explain your trust and how it works, but taking action is ultimately up to you. You can also save some money when you understand how your trust works, and what actions you can take on your own.
Funding a trust is the process of transferring ownership of your assets to your trust. Most people name themselves as the trustee of their trust, which makes transferring assets easier. Your attorney might take the initial steps of transferring ownership of real estate and other property to your trust for you, but you can actually transfer ownership yourself and save a lot of money.
If your trust does not have legal ownership of your property, then you lose the benefit of avoiding probate and some estate taxes when your property gets transferred. A trust can only transfer property that it owns, and not funding your trust means that you have an empty trust that does you no good.
If you pass away without funding your trust, then your attorney can file a "pour over will" that is designed to gather up all of your non-transferred assets and transfer ownership to your trust. However, those assets will first have to go through probate, and all of the rules of probate will apply. Before your home is transferred to your trust, it may be given to your spouse, whether you want it to or not.
One of the legitimate concerns people have when it comes to transferring assets to a trust while they are still alive is whether or not changing ownership becomes a problem. The biggest concern comes with transferring real estate ownership and how that could affect funding and homeowners insurance claims.
Some lenders do require your property to be in your personal name before they will approve a refinance or equity loan for your property. In that instance, you should go through your attorney to make the necessary changes out of and back into your trust. When transfer your real estate ownership to your trust, you should also transfer your homeowners insurance to your trust as well. When you pass away, your insurance agent will find it easier to conduct business on behalf of your property if it is owned by the trust.
It is important to change any beneficiary designations to your trust to make sure all of your assets are properly distributed when you have passed away. If you put out-of-state property in your trust, then you can bypass the probate process in that state when you pass away. Other assets to include in your trust are your checking and saving account, investments, and business ownerships.
A trust is a powerful way to protect your assets when you are alive, and then transfer your assets after you have passed on. But if you don't take the necessary step of funding your trust, then your beneficiaries will have to go through the long and frustrating process of probate.