When Should You Fund Your Living Trust?
Description: Funding your living trust is an important part of estate planning, especially if your goal is to avoid probate. Here are some tips for how and with what to fund your living trust.
A living trust offers a variety of benefits and is an essential component of any good estate plan. With it, you can minimize estate taxes, protect your property from creditors and lawsuits and even avoid the costly process of probate.
But to really enjoy all the benefits of a living trust, you have to “fund” it with the right assets and this is where many people fall short.
Your family home for example, is a perfect asset to put into the trust – the house you’re about to sell on the other hand, is not.
Unfortunately, deciding what should and shouldn’t go into a trust can be a little complicated and the result is that many never get around to funding their trust at all. Now, if you’re young, this might not be such a bad thing. Theoretically, you’ve still got plenty of time to decide what should go into your trust.
The problem is that a little procrastination goes a long way and it’s not unusual to find estates with trusts that were never funded. And once you die, it’s too late.
Yes, you can still transfer property to a trust after your death but to do that, you must bequeath the property to the trust in your Will. And how does a Will get processed? That’s right… through probate.
So, when should you fund your living trust? And what assets should go in it?
The truth is, there’s no “one way” to fund your trust. Instead, the best method is going to depend on you and your individual circumstances. A family business for example may do better operating outside the trust, especially if it relies on financing from third-party lenders.
Likewise, while your investments such as stocks, bonds and mutual funds can do well in a trust, there’s no need to go through all the paperwork if you’re planning on trading or cashing them in.
On the other hand, your safe deposit boxes, rights to intellectual property and your grandmother’s diamond ring are all great examples of items that should be placed in the trust and ideally, you should do it sometime soon. In fact, there are endless ways to fund that trust – you just have to decide what you want the trust to protect.
Of course, the best way to do that is to consult with an experienced estate planning attorney. They’ll help you distinguish between the assets you plan to keep for life and those that might not be around quite so long. They can also help with all that complicated paperwork, making funding your trust much, much easier.