Trusts are funded by re-titling or transferring title by deed or assignment of individual assets to the revocable trust. Assets may include stocks, bank accounts, real estate, timeshare interests, or business interests. Once assets are transferred into the trust, a schedule of assets should be attached to the trust document as this assists the trustee in the management of the assets held by the trust. The schedule should be kept up to date, reflecting an accurate list of current assets that are part of the trust. If a trust asset is sold, it should be noted on the schedule.
There are many assets that either should not be used to fund a trust or cannot be used to fund a trust. An example of an asset that cannot be titled in a trust is a pre-tax retirement account, such as an IRA. This asset is in fact already held in trust, that is, the Custodian is holding the account in trust for the benefit of the Participant. The account will pass at the death of the Participant to the beneficiaries that he or she named on a Beneficiary Designation Form, registered with the Custodian. While a trust can be named, in certain select circumstances, as a beneficiary of an IRA, a trust, created by the owner of the IRA, cannot actually hold an IRA during the lifetime of the owner. Consequently, if a client has most of his or her assets in retirement plans, a revocable trust created during their lifetime may not be necessary. However, this is fact specific to each individual client and must be discussed with an experienced estate planning attorney.
To better understand how to fund a trust and which assets can and cannot be used to fund a trust, contact your estate planning attorney or our office and schedule an appointment with one of our attorneys.