By: Sarah Stewart Legal Group
A trust is a powerful estate planning document. People who choose a trust as an estate planning vehicle can avoid probate, increase privacy, decrease government intervention in their matters, have more control over the use of their assets when they die, and determine if the trust will be changeable. If any of these concepts are important to you, a trust is the right plan of action.
A trust is a plan that can be funded in a few different ways. I often receive questions on how a trust is funded. We will discuss those options today.
Immediate funding happens when you transfer all of your assets to the trust quickly after creating it. You do this by preparing and filing Deeds and Memorandums of Trust on real estate and transferring checking, savings, retirement, and other accounts to the trust. With immediate funding you ensure that you have the protection of a Trustee to help you when you are incapacitated (can’t make decisions for yourself) and you ensure the trust is properly funded if something were to happen to you unexpectedly.
However, sometimes immediate funding is not an option or it doesn’t meet the goals of the creator of the trust. So, there are other options available.
(2) At Death
For some assets, this will be your only option. For instance, if you want your life insurance policies to pass through the trust, you will most likely have to name your trust as the beneficiary and the assets will transfer to the trust on your death. You have the option of doing the same with checking and savings accounts. However, if you do not title your accounts in the name of the trust, and they are not currently owned jointly, you do lose some of the protection of having a Trustee be able to step in and manage those accounts if you are incapacitated.
With real estate, it can be trickier. Though Oklahoma law allows you to file a Transfer on Death Deed that transfers the property only on death, that law has been evolving over the years. So, it may not be the best option for your family. And, you want to consider tax consequences of your choices as well.
(3) A Little of Both
The reality is, most trusts will be funded this way. There will be some property you will want to immediately transfer to your trust, and some you likely won’t or won’t be able to. So, most trust funding requires a joint approach of titling assets into the trust now, and naming the trust as beneficiary after your death. The beauty of a trust is that it is really all up to you!
Just remember, a trust is only as good as what you have in it. So, regardless of how your trust is funded, you have to be diligent to ensure it is funded, or it won’t do you any good. If a trust is not funded properly, the assets may still have to go through probate.
Be sure to contact a professional to start your trust and reach out to him or her with any funding questions.