subject: Know How To Fund Your Trust [print this page] Trusts serve many uses; they're important estate planning devices, too. But the majority of trust must be funded with your assets for them to fulfil their purpose. The apparent hassle of funding a trust delays many people from doing so. Unfortunately, not funding them properly defeats their purpose. Here's the lowdown on trusts and how to fund them.
A trust is a legal entity - just like a corporation or a person. It holds assets for a beneficiary perhaps to be distributed to him upon some future event. A trust document states the purpose of the trust and how that purpose to be carried out. A trustee is the person (or entity) that carries it out. The grantor creates and generally funds the trust.
You as the grantor creates the trust document, assigns the trustee(s) and beneficiary(ies) and signs the trust document to put it into effect. Then you must fund the trust by putting assets into it. And that means creating evidence that the trust owns (i.e. holds) that asset, and not you.
*Who owns an asset?
In terms of ownership, we can put assets into two simple categories: those that are titled assets and those that are untitled assets. Titled assets are owned by the title they're under. Your bank accounts, securities accounts, house, and car are typical assets titled in your name as proof of your ownership. The actual form of title may vary: a house has a deed, a vehicle has a certificate of title, bank accounts have simply a signed card held by the bank acknowledging ownership of moneys.
Untitled assets have no official designation of ownership. Typical assets that carry no tile are your clothes, lawnmower, golf set, jewellery, paintings and artwork. Your unchallenged possession of them generally implies they're yours, or you may keep receipts that directly show you bought them.
If you fund your trust with any assets, you must re-title them in the name of the trust or create some proof that the trust owns them as assets if they're untitled.
*How to transfer ownership of your assets to a trust?
Different categories of assets require different approaches for transfer of title. In the case of bank and securities accounts, just follow the rules of the institutions that hold these accounts. It may be simple or complicated. Most often, a simple written request to change the title for your name to the name of your trust is all that's needed.
In the case of real estate you'll need to deed real estate into your trust. You'll need a lawyer to do this, generally. And if your real estate is in a different state than you live, you'll need a lawyer in that state to re-title it into the trust's name. In the case of your personal effects like those items having a legal certificate of title, such as cars and boats will have to be re-titled. You may want to check with the insurance company that often covers this type of property to see how best to re-title them - and preserve them as insured.
Those personal effects that carry no legal title can still by used to fund a trust. Just write up a document in the name of the trust with your signature assigning them - and listing them - as owned by the trust - and not you.
Some of the hassle that delays people from funding a trust is the re-titling of items that have underlying liens, insurance, and other claims associated with them. You should use a lawyer to help you handle this.
You can see why funding some intended assets can get troublesome and neglected. But get it done so your trust can achieve the purpose for which you created it.
