There are usually two major assets that make up one's estate - real property and money. We've already covered the criteria to consider when determining what assets should go into your trust, as well as how to transfer your real estate into said trust. Below, we'll discuss how to get that second one - money - into your trust. This process is called funding your trust.

When executing your estate plan, you'll likely sign assignments of your assets to your trust, a schedule listing your trust assets, or both. However, that alone won't be enough to avoid a probate on your estate and save your family a lot of time, money, and sanity after your death. Title is king and this holds true for real estate as it does with financial assets like bank accounts. So long as the title of the account says it's in trust, then that asset is in trust. Otherwise, if it's in your name alone, then it's not in your trust and may be subject to probate.

Let's talk about the three main methods used to fund your trust with money: retitling accounts, opening a new account and moving money in thereafter, and pay-on-death designations.

Starting with retitling accounts, this is going to be how the majority of bank accounts are transferred into one's trust whether it be a checking account, savings account, money market, brokerage, CD or an annuity. The process will be straightforward but may take a little time. You will approach your bank or financial adviser with a copy of your trust and tell them what account you want to now be under the name of your trust. You'll likely have to fill out bank forms for each account and wait for their internal processing but that should be it. Your account number won't change. Your taxes won't change. The only difference at the end of the day for you is that your statements will go from Thomas and Martha Wayne to Thomas and Martha Wayne comma Trustees of the Wayne Family Trust.

Alternatively, you could approach your bank or financial adviser with a copy of your trust and instead simply open a new account under the name of your trust, and then begin moving money from other accounts into this new trust account. This method is often used when someone wants to simplify their estate - declutter - and is unfortunately common after the death of a spouse. In essence, you are creating a new basket of your trust and moving the disparate accounts you have in other baskets to this new, single trust basket.

Finally, we have setting a pay-on-death designation on your account and directing the beneficiary to be your trust. That means the funds in the account stay in your name during your life, but once you pass away, the account is closed, and the funds are to be paid to your trust. You still need to approach your bank or financial adviser to set this up so you may be wondering what the purpose of this method would be if you can simply put the account in trust at the same time. The answer is that sometimes you may want to have money not in your trust, but ensure it goes to your trust at your death and avoids a probate. An example would be to make sure you have money outside of your trust so your attorney-in-fact under a financial power of attorney can manage the funds or help pay bills, but also ensure the funds go to your trust estate for distribution.

Keep in mind, this method means the trust isn't actually funded with that money until your death, and your successor trustee of your trust will need to go collect the funds from the bank. A common technique in more advanced estate planning cases is to designate a trust as the beneficiary of a life insurance policy so that the trust has liquidity outside of typical assets which may only be real property rather than money.

There are a few quick points to keep in mind as well. As discussed, these methods are generally applicable for most accounts: checking, savings, money market, brokerage, CD and annuity. They will also apply to transfer agents where people often hold stocks. Additionally, check with your bank before changing things on CDs and annuities to make sure putting it in a trust won't be considered an early withdrawal and trigger fees and taxes unintentionally.

Next, retirement accounts like IRA, 401(k)s and 403(b)s for example, can typically stay titled as is, but will allow for beneficiaries to be designated. For the most part, we recommend for our clients to pick people as the beneficiaries, but your trust can also be designated as the beneficiary meaning the trust's distribution will determine who will receive something and how much. Keep in mind that those receiving money as a result of an IRA must take all of their funds out within ten years of your date of death as an inherited IRA. However, your trust needs to have the right "pass-through" or "conduit" language in it to allow for this inherited IRA election (rather than cashing out the money) and allow for greater tax flexibility - a topic for another video.

As a final word, your attorney cannot do any of the funding methods I mentioned for you. Financial institutions like your bank, generally won't talk to your lawyer about your accounts. A great attorney, however, will really hold your hand throughout the process no matter what route you choose to go down.

BETHEL LAW CORPORATION
ESTATE PLANNING | ELDER LAW | BUSINESS PLANNING

CLICK HERE OR CALL US AT 909-307-6282 TO SCHEDULE A FREE CONSULTATION.