Basics of trust funding
A couple of years ago (here) I wrote generally about trust funding. Now I'd like to share some of the basics of how the funding process actually works for a living trust.
You start by making a list of your assets -- house, retirement accounts, non-retirement accounts, insurance, etc. The idea is that all of these assets are owned by or will pass to your living trust at the time of your death (note: there are some cases where you may not want retirement accounts to pass to your living trust, but that's beyond the scope of this post).
You will notice that I said "owned by or will pass." Basically, we're doing two different things:
1. Changing ownership of certain assets, like real estate and non-retirement accounts (investment accounts and bank accounts). The trustee immediately becomes the owner of these assets (note that the trustee of a living trust is usually the person who created the trust).
2. Changing beneficiary designations of certain assets, like insurance and retirement accounts. When the person who established the trust dies, the assets flow into the trust.
Most trust funding is pretty easy to do, but rather tedious. For re-titling non-retirement accounts, you just tell the entity how the accounts should be re-titled (your attorney can tell you "the magic words"). Typically, it would be something like a switch from "Joel A. Schoenmeyer" as owner to "Joel A. Schoenmeyer, as Trustee of the Joel A. Schoenmeyer Trust dated January 18, 2003." Beneficiary designations are changed in a somewhat similar way, without reference to the current trustee (since he or she probably won't be around when the grantor dies).
The most difficult part of trust funding involves real estate, which I'll discuss next time.
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