Funding a Trust with Assets

HomeBlogAsset & Legacy PlanningFunding a Trust with Assets

A living trust, also known as a revocable trust, is a legal framework that keeps your assets safe from probate and creditors. You can even better plan how to give an inheritance to an heir who has special needs or suffers from a substance abuse issue or gambling addiction. 

Living Trusts are popular because they help in areas where retirees are most concerned. However, without assets to add to the trust, there is no trust. Let’s look at which of your investments are best for funding your trust and which are better left out.

Personal Bank Accounts

It is usually an excellent decision to move any bank accounts that you don’t regularly use into the name of the trust. After all, the point of the trust is to protect your assets. Good funds to move include additional savings and money market accounts.

Moving CDs sometimes require waiting until they mature. Contact your bank to find out more.

Retirement Accounts

If a retirement account is qualified, this means that you have not paid taxes on it yet. Once you start withdrawing disbursements each month, you will pay taxes little by little.

Moving a qualified retirement account into a trust can cause all of the tax for the entire account to be due that year! This happens because you are emptying your retirement account and moving it somewhere else. The amount of tax you owe could be astronomical. It is never a good idea to transfer a qualified retirement account into your living trust.

Designate Beneficiaries Instead

If you title your retirement account as a beneficiary, your heirs still inherit without the account without going through probate. Your trust documents specify how to disperse beneficiary monies from the account inherited by the trust after your death.

You can also designate the trust as a beneficiary for your HSA or MSA accounts and your life insurance policy. Always check with your estate planning attorney before taking definitive action, though. 

Motor Vehicles

Before transferring a vehicle such as your car or boat into a trust, consider taxes. According to the NCDMV, there is a 3% tax on transferring the title along with any retitling fees, highway use fees, and registration fees. It may not be worth moving a vehicle into your trust. Talking with your estate planning attorney can help you make the best decision here.

When Should I Transfer Assets?

If you are the trustee of your trust, you are in charge of when you would like to move assets. You can always sell or give away property in your trust. You can also take assets out of the trust and make them personal assets again.  

How Do I Transfer Assets?

It is not difficult to transfer most assets into your trust. You just contact the bank or other institution and fill out documents and show your certificate of trust. This changes the owner of your assets so that you personally no longer own the assets. Your trust is now the owner.

When you change the owner’s name with some types of accounts, it is a problem because the asset is changing owners. 

With real estate, you are changing the name on the deed. Some banks don’t have any problem with this, but others may ask you to sign a guarantee stating that you will pay the mortgage if the trust does not. Contact your lender to find out their general policies on moving your real estate into a trust. If you do not contact your lender or read your mortgage documents closely, you could be in for a surprise if your bank decides your loan is due immediately.

How Much Should I Set Aside to Pay for Attorney Fees?

Attorney fees can range from $1,000 to $3,00 to set up a living trust, depending on where you live and how complex your setup is. It is much better to spend the money on expertise than to buy a DIY estate plan online that is generic. Hiring an attorney means that your specific situation is considered extensively before any decisions are made.

At Vail Gardner Law, we understand that making plans for the future is a gift to your family. We would love to meet with you and discuss your unique situation and how best to take care of yourself and your family moving forward. Our specialization is asset protection planning, and we focus on current tax laws and estate planning strategies that protect your assets. We also study new ways to save more for later. Give us a call to get started with your plans or rethink an older strategy today.