Funding Your Trust

A Living Trust is a like a box.  You put your assets into the box during your lifetime and, after you die, those assets are distributed according to your wishes, either outright to your loved ones or held in the box for their benefit.  Assets in the box do not need to pass through probate.

There are three ways to put your assets into a Living Trust, also known as funding the trust. 

First, you can title an asset in the name of your Living Trust.  For real estate, this means changing the owner of the property from yourself to your Living Trust.  Financial accounts work the same way: you change the owner of the account from yourself to your Living Trust.  Any property titled in the name of your Living Trust is in the box.
 
Second, you can direct your assets into the Living Trust after you die.  For example, you can name your Living Trust as the “pay-on-death beneficiary” of your checking or savings account or the “transfer-on-death” beneficiary of your brokerage accounts.  You can also name your Living Trust as the beneficiary of your life insurance policies or retirement accounts.  When you die, the assets in any account that names your Living Trust as beneficiary will be transferred into the box. 

Finally, if you forget to put an asset into the Living Trust during your lifetime or direct it into the Living Trust by beneficiary designation, the asset will be added to the box through something called a Pour Over Will.  A Pour Over Will is part of a complete estate plan alongside a Living Trust.  It is called a Pour Over Will because it “pours” any forgotten assets into your Living Trust after you die.  The downside is that, if the assets that you forgot to put into the Living Trust include real estate or have a cumulative value exceeding $100,000, to “pour” the assets in, your Personal Representative must initiate a probate proceeding. Having to go through probate undermines one of the primary benefits of creating the Living Trust in the first place!  The good news is that you now know how important it is to fund your Living Trust during your lifetime and can ensure that all of your assets make it into your Trust. ​