You’ve got yourself a living trust. Congratulations! But guess what? A trust is pretty much like a high-performance sports car. It won’t get you anywhere without fuel. 

I’m talking about funding your trust. Skipping this step is like owning a Ferrari without gas; it looks great but won’t move an inch. Let’s dive into how you turn that stationary beauty into a roaring beast by funding it right, plus why the assignment of personal property and the pour-over will are a trust’s best friends.

The Golden Rule: Fund Your Trust

A living trust is your secret weapon for passing on your empire seamlessly, without letting the courts or some random attorneys decide who gets what. It’s your legacy, your rules. But an unfunded trust? It’s like having a treasure map with no treasure. Pointless.

If you don’t fund your trust, your heirs are heading towards the probate process, something you’d rather they avoid. It’s costly, slow, and public. So, what’s the game plan? Think of your trust as a vault. You’ve got to fill it with all the valuables: real estate, your cool car, stock portfolio, and yes, even your business interests.

What to Do With Each Type Of Asset

Brokerage Accounts. There are two options here. Either retitle them in your trust’s name, giving your trust immediate control, or go the transfer-on-death route. The downside of a transfer-on-death designation is that if you become incapacitated, your power of attorney will need to handle the account since the trust does not receive any power until your death. Powers of attorney are notoriously difficult to use in these situations; one reason is that they will need to prove you can’t manage your finances and they’ll need to do this when the clock is ticking.  Bills wait for no one and delays could throw a wrench on your financial flow.

Read more about powers of attorney in our upcoming blog post.

Retirement Accounts and IRAs. Naming a trust as a primary or contingent beneficiary can be a strategic move, especially for special situations (think minors or special needs), or to set up distributions on your terms, whether these are milestone-based incentives or just spreading out the wealth to avoid splurges. The trust allows you to maintain control from beyond the grave.

There can be tax disadvantages to naming the trust as the beneficiary unless you’ve put the proper provisions in place. For example, if you give assets to someone on government aid without the proper set up, they can lose their benefits. 

Before you update your beneficiaries, talk with your estate planning attorney. 

Read more about retirement accounts and IRAs in our upcoming blog post.

529 Plans: Naming the trust as a successor ensures your educational legacy runs exactly as you’ve drawn it up, even when you’re not around to see the play through.

Life Insurance: Making your trust the primary beneficiary keeps creditors at bay and ensures your treasure chest is distributed exactly how you envisioned. It also ensures that insurance benefits can be properly managed for the intended beneficiaries, even if one of them is incapacitated at the time they inherit. 

Real Estate: Failing to retitle your property to your trust is like leaving your back door open. You need to secure it so that it goes to the right people without a hitch. But, states have different rules about transfer taxes. Before you retitle real estate to your trust, consult with your estate planning attorney to make sure you understand the tax implications in your state. 

Vehicles: Every state is different. Depending on where you live, titling your vehicle may not be necessary. It can be easy or very time-consuming. 

The Pour-Over Will: Your Safety Net

Despite your best efforts, something might slip through the cracks. Enter the pour-over will, your trust’s best friend. It catches anything outside the trust at the time of your passing and pours it right in. Think of it as your estate’s cleanup crew, making sure everything ends up where you wanted it.

At your death, the pour-over will is activated. It acts like a wide net, catching these outside assets. But, because these assets are in your name and not in the trust’s name at the time of your death, they must first go through probate. The probate court will officially recognize the pour-over will and it will work to gather up your assets. Even though your assets will go through probate, the will clearly directs that these assets should be transferred to your trust.

Assignment of Personal Property: The Unsung Hero

This document helps with all assets that are not titled in your name. Use it so that all of the items that can easily fly under the radar—from your grandfather’s watch to your favorite rocking chair—are securely transferred into your trust.

How it works: After you’ve created your trust and drafted the assignment of personal property, you’ll list the items you want to include, such as artwork, jewelry, or even your digital assets. Once signed, this document becomes part of the trust’s documentation, ensuring that every piece of personal property listed is now officially under the trust’s management.

Estate planning can be complicated. We’ll make it simpler and easier for you. Contact us for more information or to set up a consultation.

This post was created by Avatus Stone, COO & estate planning strategist at JM LAW, PLLC.