An estate planning tool, a trust is a relationship that is created according to the guidance of an individual, called the trustor. This trust then directs people known as the trustees, to hold the trustor’s property with regard to certain duties to use and protect for the benefit of other people known as beneficiaries. A trust can be created for any reason like the financial benefits of the person who created it or to provide financial support for a living spouse or for a charitable purpose. Here is a complete guide on trust funding.
Assets or personal property without titles
A lot of assets need not carry formal deeds or titles. It can include several things like jewelry, furniture, clothing, etc. Since there is no title to the assets, they need to be transferred to the Trust.
It can be done by signing a basic transfer deed which states that the property is now owned by the Trustee of the particular Trust. This document should carry details of all the assets being transferred to the Trust.
After signing the document, it should be kept secure with the records of the Trust.
You can transfer your bank account and other financial accounts to the Trust. Check with the bank for information before you start the process. The first step is to take the necessary forms from the bank. Now, complete and sign the form. Return them to the bank.
You might be asked to file a “Certificate of Trust” document to share information about the Trust.
Ask the bank to transfer the title to the Trustee of the Trust. Some banks keep the same account number after changing the ownership.
You need to sign on a deed to give your interest to the Trust. The same will then be recorded with the respective county. When it comes to real estate, the process will vary in each state and county. You can contact the County Recorder to get more information about the same.
The most common deeds to transfer property to a Trust include Quit Claim Deeds or Trust Transfer Deeds. Once you check with the County Recorder for requirements, you will get information about the paperwork required.
Now fill in details in the deed by mentioning the Trustee of the Trust and complete the necessary paperwork. You might have to adhere to additional paperwork to identify the Beneficiaries of the Trust. Finally, record the deed with the County Recorder.
LLCs and Partnerships
Interest in LLCs and partnerships can be transferred by writing an Assignment of Interest which states that you are willingly transferring your interest to the Trust. You need to provide a copy to other partners.
Once that is done, go through the partnership agreement to check for any restrictions for transfers.
Ensure that the LLC or partnership updates the records to show the Trust as the owner of the interest.
In the case of corporate stock, the transfer is easy and there are no excess requirements. You need to check the corporate records in case of any restrictions, then you need to get in touch with the Secretary of the corporate to update the records of ownership and provide a new stock certificate.
You will have to complete the Assignment of Stock and ask the Secretary to update the ownership records. The new stock certificates should reflect the Trust as the owner of the interest.
Life insurance plans allow you to designate where the money will go by filling a “Beneficiary Designation”. The proceeds are either paid to the Trust or someone in your family.
When the proceeds are paid to the Trust, they would be controlled by the terms of the Trust and will not be paid out to the Beneficiaries.
You can contact the life insurance company directly and request them to update the Beneficiary details.
You do not need to transfer the ownership of the retirement plan to a Trust. All you need to do is focus on where the proceeds will go. Do not change the ownership of the retirement plan but designate a Beneficiary to receive the proceeds after your death. Trust funding of retirement corpus is similar to life insurance.
You can decide whether you want the proceeds to be paid to the Beneficiary directly or to be controlled by the Trust. It helps to hand it over to the Trust if the beneficiaries are young children. Contact the plan administrator for the form so that you can update the Beneficiary information.
It is important to follow the above-mentioned steps for Trust funding in USA. The process should be carefully carried out keeping the specific documentation requirement in mind.