A common estate planning mistake made by many people – including celebrities and the wealthy – is not ensuring the trust you have created actually holds all your assets. This process of transferring your personal assets into your trust is called “funding.”
Unfortunately, most lawyers do not make sure this is properly handled for their clients, so even if you’ve worked with an attorney you need to double check this critical issue. If you do not transfer your assets into your trust correctly, it is nothing more than an empty shell and will not accomplish the objectives (such as avoiding probate) you had in mind when you established it.
Here is a basic rundown of the proper procedures for funding your trust:
Real estate – a new deed in the name of the trust must be drawn and recorded at the county clerk’s office. For properties with mortgages there may be additional issues to consider so always seek legal counsel before recording a new deed.
Stocks, bonds, mutual funds – to transfer the ownership of these assets into your trust, you need to contact your broker, investment counselor or transfer agent for the proper paperwork and complete those documents as instructed.
Savings bonds – you will need to obtain a reissue form from the Federal Reserve Bank and re-title the bonds in the name of the trust.
Brokerage accounts – contact your broker for the proper forms that will enable the broker to close the existing accounts and transfer the assets into a new trust account.
Stock certificates – you will need to send a completed “stock power” form as well as a W-9 form with your tax ID number with the original stock certificates to the company’s transfer agent.
Bank accounts, CDs – new accounts will need to be established in the name of the trust. If your bank cannot transfer CDs until the maturity date, then mark them “in trust for” a beneficiary until the CDs mature and you can transfer them to the trust.
Life insurance, retirement plans – these assets cannot be owned by a living trust but it may be appropriate to name your trust as beneficiary. Seek legal counsel before changing the primary or contingent beneficiary on these types of assets.
Written confirmation – don’t just assume everything has been transferred correctly because you submitted the paperwork. Always ask for and keep a copy of a written confirmation indicating your assets have been moved into your trust.
As your partner in planning for the financial security of yourself and your family, we would never let your trust go unfunded. That’s because our concern for you doesn’t stop with the signing of your legal documents — we always follow up with clients to ensure everything has been done properly so they are fully protected.
If you’d like to learn more about how a trust might benefit you and your family, call us to schedule a Family Estate Planning Session and get educated about your options. There’s no obligation and if you mention this article there will be no fee.
To your family’s health, wealth, and happiness,