Drafting the trust agreement is only the first step in establishing an effective trust. The next crucial step is to fund the trust. “Funding” means transferring your property to the trust. How you go about funding your trust will depend on the nature of the property. When it comes to Los Angeles trust administration, there are several options, so you should discuss your situation with an experienced trust attorney.
What does it mean to fund a trust?
After the trust agreement has been executed, the next thing that needs to be done to make the trust effective is to “fund” or transfer the property into the trust. There are essentially three methods to fund a trust: assignment of ownership rights to the trust, transferring title or ownership to the trust and identifying the trust as the beneficiary. The appropriate method will depend on the type of property you are transferring. While none of these methods are particularly difficult to accomplish, the correct steps need to be taken to ensure the trust is funded appropriately.
Transferring ownership of property to the trust
There are a variety of assets which can be funded to a trust simply by changing the name of the owner. For example, bank, investment, and brokerage accounts and stocks and bonds that are held in certificate form can be funded by naming the trust as the new owner. The same is true for real estate or land, by drafting a new deed naming the trust as the property owner. Ask your bank or other financial institution whether you can simply change the name on the account or whether you must close the account and open another account in the name of the trust.
Assigning ownership rights to the trust
There are other types of property which, instead of changing the name of the owner, you must assign ownership. This is method is typically required when a certificate of title is not necessary. For example, personal property, personal loans, partnerships, and copyrights, should be assigned to the trust. So, if you own intellectual property rights to creative work, such as trademarks, patents, and copyrights, there is a basic form that can be used to assign those rights to a trust.
Naming a new beneficiary of certain property
For assets that require the naming of a beneficiary, the appropriate way to transfer those assets to your trust is to change the name of the primary and/or secondary beneficiaries. This is most commonly the method used for life insurance policies, retirement accounts, and pension benefits.
What happens to property excluded from a trust?
If you fail to include all of your assets in your trust, then the remaining property will need to go through the probate process in order to be distributed after your death. If one of the purposes of your estate plan is to avoid probate, then you need to be sure to include all of your property in your trust. Otherwise, your Los Angeles trust administration will not be as successful as you expect.
Determining which assets should be funded to the trust
When a trust is created, it is necessary to decide which of your assets you want to include in the trust. Many people simply transfer all of their property to the trust, while others may leave certain property out. You can still take care of those assets by using a “pour over” will.
There may be certain types of property are not appropriate to include in a trust, such as vehicles that you regularly use. This type of property may pose a practical problem, in that the vehicle registration and insurance would also need to be in the trustee’s name. That type of arrangement can be confusing to many financial lenders and insurance companies.
You are not required to give up control of your property with a living trust
It is commonly misunderstood that you are not required to relinquish control over all of your property once it is transferred to a trust. If you have a living trust, you can retain the authority to modify the trust and the trust property at any time while you are still alive. That is one of the greatest benefits of having a revocable living trust. It also means you have the ability to manage the trust and all of its property.
If you have questions regarding funding of trusts, or any other trust administration issues, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.