In this episode of Estate Planning 101, Attorney Thomas B. Burton discusses, in detail, the first question that comes to everyone's mind after forming a Trust, "How Do I Fund My Trust?" Attorney Burton explains what it means to fund a trust, or transfer assets into the name of the trust and explains how this funding process is critical to ensure your trust is able to accomplish your objectives of managing your assets during life and providing for the efficient administration and distribution of those assets after death.
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Transcript of Video: How Do I Fund My Trust?
Hello I'm Attorney Thomas Burton. I'm an estate planning and asset protection attorney here in Wisconsin and today I'm going to cover another topic in my estate planning education series and this is one, that I see come up after someone has formed a trust, whether a revocable living trust or an irrevocable living trust and it's How Do I Fund My Trust?
Whether you work with my office or another lawyer or you're considering forming a trust, let's say you've just completed forming a trust, or you formed a trust many years ago and you're reading up more on it today and you're seeing this terminology about funding a trust, okay, and you're wondering what does that mean, fund my trust and is my trust funded? Well the first step before you can fund the trust is first you must form the trust okay? So to actually form the trust, I tell my clients the day we form the trust is the day you sign it. Our trusts are in writing on paper and when you sign it as the person creating it, we also call you the grantor, sometimes the Settlor or you may hear it called the Trustor, okay? That's the person who creates the trust. The date you sign is generally the date your trust springs into life. So when you hear a living trust, it means that the trust you create during your life and it comes into being on that date you sign okay and then from then on, you'll often reference this date as the date of your trust.
The first step is to form the trust meaning make a legal trust in the state of Wisconsin or whatever state you're in. You must form the trust under the laws of that state. After it's formed, then we get to the funding and there's a lot of assets we can place into a trust. I tell my clients there's your life before a trust and your life after a trust. Often before you have a trust, you have assets, all your assets are in your individual name okay? So you just have them as whatever your name is. Your house is titled in your name, your bank accounts, your brokerage accounts, stocks, bonds, they're all in your individual name as John Smith generally, but once you form the trust, then what we've created is a new entity, okay, and we have the trust and think of it like a bucket and the great thing about the trust is, the trust can outlive you. I tell my clients sometimes it's helpful to think about forming a company. When Sam Welton formed Walmart, that company outlived him. Sam Walton died several years ago but Walmart continues on today even past let's say here Sam Walton, his death, he dies but the company he created, Walmart, keeps going Walmart Inc. and let's say he created it back here, middle of his life, early in his life created Walmart. So the same with your trust, the date you created is this date here then you keep living and eventually you pass away, death here but the trust can keep going past your life to distribute your assets or administer them according to your wishes.
Just like Walmart, the trust can keep going for whatever period of time you say. Now for a revocable living trust, that's often just going to be a period of months or maybe a year to 18 months to distribute assets. If you have extra asset protection built into the trust or sub-trust for grandchildren, it could go longer okay? But the key to think about is the great thing about a trust is you can create it today and it can continue on past your death, carrying out your wishes as you go.
So then thinking about funding your trust and I'm just going to move let's see, over here, so you can see, the assets we talked about here, the stocks, bonds, house, bank accounts, how do we get them into the trust? I prefer re-titling the assets while you're alive. This is the most, the way to get the most bang for the buck out of your trust because you get both incapacity protection, protection during your lifetime and after you're gone. So what we do with these assets here is we do what we call retitling them into the name of the trust. So any asset with a title like a deed, if it has a title, deed, bank account etc. we retitle it. That means we change the title of the trust of the account from your name John Smith individual to John Smith living trust and you may see on the title at my firm or another one will give you the exact, when you're done that my friend, we give you the exact language and I will put this 'UA' and that just means Under Agreement and you might see 'DTD' dated and let's say whatever the date is you know, January 1, 2020 but the name is John Smith living trust.
So once it's created we can retitle these assets from your individual name into the name of the trust and for the house we commonly do this with a quitclaim deed. So you'll see this term and it's very easy to do. It doesn't disturb any of the protections meaning it doesn't count as a transfer. You don't have to pay transfer tax in the state of Wisconsin, you can just put it from your individual name into the trust and then you have the house retitled and again the key is once it's in the trust, the trust can outlive you in your death and keep going past your death.
Now the other thing to be titled would be bank accounts and again you just go to the bank and you fill out the form from John Smith individual to John Smith living trust and if you work with my office, we give you instructions on how to do this with the exact name of your trust at the end. Finally, another big thing that's really, actually easy to avoid probate is your personal property. So that's all of your items of clothing, jewelry, furniture, anything without a title basically, that's in your house or shed, breaks, shovels, trailers, things like that, we can assign them with an assignment of personal property under contract law to the trust. So this is again very handy because this can have significant value and you can avoid probate on all of that by assigning it to the trust. So we fund the trust by executing that assignment and at my office, we do it on the same date we sign the trust.
So right off the top, on the date you sign your trust, you can have your personal property in there, immediately, by executing the assignment. We can, at my office, we include the deed to your home, we'll take care of retitling the home. We have you sign that on the deed and then it gets recorded with the register of deeds, it's done in a week or two and then you just tell the bank accounts how to retitle them into the name of the trust. You can have it all completed within two weeks after you sign your trust, a month if you want to take your time but this is how you fund the trust. So then the trust has assets because when you form it initially the trust has no assets till you place them inside.
The word 'Funding' is really just placing the assets into the trust and in my opinion, if you're going to take the time, effort and expense of setting up a trust, you should fund it right away, so you can gain the incapacity protection and the protection after death from a trust. Now there's other types of assets you can put in the trust. I covered the top ones today, so talk with your attorney about your specific mix of assets and what to put in there but I wanted to create this video because I'm a visual learner and I hope it helps you as you're thinking about your own estate planning and how to fund your trust, after you've completed it. So thanks for watching and we'll see you next time.
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