Revocable trusts can be a beneficial estate planning tool. A valid Trust requires a Trustee, a beneficiary and property in the Trust. However, the funding of a trust can be easily overlooked or put off until a later date. You have taken time to meet with professionals and create an estate plan. You have attended the signing ceremony for your Trust however your Trust is not complete. You must take time to fund your Revocable trust.
A Revocable Trust can be an effective way to limit probate proceedings and provide for asset management in the event of the Trustmaker’s incapacity. In addition, revocable trusts also referred to as a “living trusts” are flexible options to achieve estate planning goals, including tax, long-term care, and asset-protection planning.
However, failure to fund the trust, may result in your heirs having to go through a more complex probate proceeding that you wanted to avoid or limit. Likewise, a failure to fund your trust can result in your assets being distributed to individuals that you did not intend to have your assets. Not funding your trust can undermine your whole estate plan.
To transfer assets to the trust, you will need to retitle the assets you wish to be included in your trust, in the name of the trust. Your financial institution, bank and investment accounts will need to be titled into your trust. You should consult with your attorney for the exact name and wording of your Revocable Trust.
Depending on the institution, you might be able to change the name on an existing account. However, you may need to open a new account in the name of your trust and then transfer your funds. If you are placing real estate into the trust, you should consult with your attorney to ensure it is done correctly. You should also consult with your attorney before placing life insurance or annuities into a revocable trust. And consult with your attorney before naming the trust as the beneficiary of your IRAs or 401(k) because that could have tax consequence.
The financial institution or attorney may require a copy of your trust including the signature page, as well as signatures of all the trustees to be certain your assets are titled properly. As long as you are serving as your own trustee or co-trustee, you can use your Social Security number for the trust. If you are not a trustee, the trust will have to obtain a separate tax identification number and file a separate tax return each year. You will need to speak with a tax professional regarding tax implications and how to file a tax return.
When you acquire new assets, it is important to consider adding them to your trust. Further, it is recommended that you review your trust annually to make sure your assets are properly titled.