Trusts are some of the most powerful tools utilized by those who want to provide specific resources for their loved ones when they die. Trusts are also useful for those preparing to live on a fixed income during their retirement years.
A well-planned and properly-funded trust can have an impact that persists for the rest of a beneficiary’s life and/or could protect someone from aggressive collection activity in their golden years. For a trust to achieve someone’s estate planning goals, the testator creating the trust will need to fund it properly. These are some of the ways that an individual can fund a trust that could play a meaningful role in their estate plan.
Transferring property to the trust
The process of funding a trust involves making it the owner of specific resources. People can accomplish this during their lives or after they die. Some people concerned about properly funding a trust may believe the common misconception that all assets intended for a trust must be in the trust already when they die.
That is one of the more common approaches, but it is not the only possible solution. People can transfer their most expensive assets to a trust to preserve them in the event of collection activity. They can also move some of their resources to a trust before retirement to diminish what their estate will be worth after their death.
Other people will arrange for assets to transfer to the trust after they die. Some people will use life insurance proceeds as a way to fund a trust. They simply file paperwork with the insurance provider designating the trust as the beneficiary for their policy. Others may execute a deed that someone can record after their death.
Many people choose to create pour-over wills that will transfer their remaining assets to the trust after they die. This helps avoid a scenario in which they have not named beneficiaries for certain assets, but those assets typically have to pass through probate courts.
The right solution depends on the resources that someone has in their name and what someone wants to accomplish with their trust. Reviewing resources and estate planning goals carefully with an attorney can help people determine the best solution for funding a trust during the estate planning process.