Q: What does “funding” a trust mean?
A: Dear Curious:
For a living trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of certain assets—real estate, bank accounts, securities—you want covered from your name into the name of the trust. Retitling assets in this manner is known as “funding” your trust.
And for assets like life insurance policies and IRAs that require beneficiary designations, you would re-name the trust as the beneficiary of those assets, rather than the individual beneficiary, in order to fund them to the trust.
In this way, when you die or if you should become incapacitated, funded assets will effectively be owned by the trust, and they can then be passed to your beneficiary by your chosen trustee as stipulated by the terms of the trust without going through the court process called probate.
A Personal Family Lawyer® can not only create your living trust, they’ll also ensure it’s properly funded throughout your lifetime.