As an Estate Planner I often answer questions about the Mechanics of Trust Funding:
Some important concepts include:
- Only Assets owned by or related to the Trust are controlled by the Trust Terms;
- Common Trust funding Assets include: Real Estate, Bank Accounts, Brokerages, Business Shares, Intellectual Property, and Personal Items;
- Common Assets to Relate to Trust include: Retirement Accounts (Pension, 401(K), IRAs) and Life Insurance.
- The Schedule of Trust Assets is an important Information Sheet (usually at the back of the Trust Instrument);
- Without the Schedule, an asset could become lost due to the Trust Beneficiaries being unaware of its existence;
- A General Note of Assignment is used to transfer miscellaneous house objects and personal effects to the Trust;
- Real Estate is transferred by retitling the Deed into the name of the Trust and preparing Tax Forms.
- Bank Accounts and Traditional Brokerages can be retitled into the name of the Trust;
- Retirement Accounts, including IRAs, and Life Insurance, can rely on Beneficiary Designation. You can relate these to the Trust by naming the Trust as a beneficiary, often as a contingent beneficiary;
- Beneficiary Designations may be inadequate as you cannot list or name a “Beneficiary Class”, i.e. a category of relatives, or your bloodline and heirs- at-law.
In conclusion, if an Asset is not owned or related to the Trust it will be handled outside of the Trust terms. Avoid having an Asset without a succession or inheritance mechanism. If no mechanism in place, it can be owned or related to the Trust, which avoids having to hire a lawyer to assist in its post death collection.
