Trusts are essential estate planning tools, ones that can help you avoid probate. However, in order for your trust to be effective, it must also be appropriately funded. According to The Balance, different types of trusts are funded differently.
Beneficiary designations are attached to assets like life insurance policies and retirement accounts, including employer-provided 401(k)s. In many cases, designations list who you intend to receive the proceeds of the asset after you’re gone. With a trust, the beneficiary designation should read the name of the trust, the trustees under the trust, as well as any successor trustees listed. Keep in mind that beneficiary designations override any other estate planning tools. That means if you set up a trust but fail to change the designations, the court will distribute your assets to whoever is named on the asset.
When it comes to bank accounts, stocks, or real estate, the title of the specific assets must be changed to show ownership by the trust. This establishes that the asset is no longer owned by the individual owner but by the trust itself. This is how trusts help people avoid probate. Since these assets aren’t owned by the deceased, they don’t need to be included within the rest of the deceased’s assets.
Some assets aren’t associated with a title of ownership. This includes antiques, artwork, jewelry, or certain types of intellectual properties. In this case, you can assign ownership rights to the item to show new ownership by the trust. Getting the assignment language right can be a bit tricky, so it’s best to confer with an estate planning attorney to ensure your trust is properly funded with the assets you’ve chosen.