How to Fund a Trust

What Is a Trust?

A trust fund is a legal entity designed to hold property or assets for another person, group, or organization. Trusts generally involve three parties, the grantor, the beneficiary, and the trustee.  The grantor is the person who is creating the trust, contributes the assets, and determines how the trust should be managed. The beneficiary is the individual, group, or organization the trust fund has been established for. The trustee is a neutral third party entrusted to manage a trust.

How To Fund A Trust

Once a revocable trust, also known as a living trust, has been created, assets can be transferred from the grantor’s name or joint names, into the ownership of the trust. Funding a trust can also include naming the trust as the beneficiary of any assets that involve a beneficiary designation.

When the grantor funds the trust, it ensures their assets will be handled according to the terms of the trust agreement. The trustee has no authority over any of the grantor’s assets that have not been retitled in the trust’s name. Assets not properly transferred to the trust:

  • cannot be managed by the trustee
  • may be subject to probate
  • may be dispersed according to rights of survivorship rather than your intended beneficiary

Titled and Untitled Property

How a Trust is funded depends on the type of property in question. Generally, for titled property such as vehicles, the grantor may request a new title showing the living trust as the owner. For untitled property, an Assignment of Property document may be used to specify the trust as the owner.

Assets That Can Be Used to Fund A Trust

Once the transfer of assets to a trust is complete, those assets are protected from probate and under the management of the trust and the trustee. Assets that can be used to fund a trust include:

  • Financial Accounts: Most financial institutions and banks have their own process and forms for transferring accounts to a trust. In some cases, a copy of the trust must be provided.
  • Real Estate: Transferring real estate to a trust varies by state and county. Typically, the process includes signing a deed to transfer the grantor’s interest in the property to the Trust and then having the deed recorded with the county.
  • Beneficiary Accounts: Beneficiary accounts include life insurance policies and retirement accounts. Generally, these accounts will not require a transfer of ownership to the trust. Instead, the grantor can complete the necessary beneficiary designation change form. Updating the primary beneficiary to the trust will ensure the proceeds are managed in accordance with its terms.

Next Steps 

If you have questions regarding creating a trust or potential steps you might consider for funding a trust, please reach out to our office at (914) 228-7448.

Categories: 
Related Posts
  • How to Create a Living Trust Read More
  • What Can Homeowners Deduct on Their Tax Returns? Read More
  • How Long Does It Take to Probate A Will in New York? Read More