Best Practices for Funding a Trust

Funding a trust is an essential step in estate planning. This process involves transferring assets into a trust, which can allow your assets to be distributed seamlessly to your loved ones after your passing. However, funding a trust can be complicated and often requires careful attention to detail and legal knowledge. That's where an experienced estate planning attorney can help.

Located in Rocklin, California, The Law Office of Geoffrey Fong can guide you through the process of funding a trust, help you avoid common pitfalls, and make sure your estate is structured in the most efficient way possible.

In this blog, Attorney Geoffrey Fong explores the best practices for trust funding in California, discusses the benefits of working with a trust attorney, and provides a step-by-step guide on how to properly fund your trust.

What's Involved with Funding a Trust?

Funding a trust involves transferring your assets into the trust you have established. Creating a trust is a key step in estate planning; however, without this step, your assets will not be governed by the terms of the trust, potentially leaving your estate plan incomplete. Funding a trust typically involves transferring a variety of assets, such as:

• Real estate

• Bank accounts

• Life insurance policies

• Retirement accounts

• Personal property

Properly funding a trust is not a one-size-fits-all process. It requires a thoughtful evaluation of your assets and determining the most appropriate way to title them in the name of the trust. Each type of asset may require a unique approach for transfer. Consulting with an experienced trusts attorney can help ensure the process is handled efficiently and aligns with your estate planning goals.

The Importance of Funding a Trust

California has strict laws governing estate planning and trust administration. As a community property state, California generally considers property acquired during marriage to be jointly owned by both spouses. Trusts must be carefully drafted and funded to ensure each spouse’s assets are managed appropriately under this system.

Additionally, California’s probate process is complicated and often involves significant time and expense. Probate, a court-supervised procedure, can take months or even years to complete and incur high fees. By properly funding a trust, your assets can bypass probate entirely, saving both time and money while streamlining the estate administration process.

Key Best Practices for Trust Funding in California

To make sure your trust is properly funded, there are certain steps you should consider taking. While the specific steps may vary depending on the circumstances and size of your estate, you should consider taking the following steps.

Work With an Estate Planning Attorney

Before you fund your trust, consult a qualified estate planning attorney who has experience handling trusts in California. They can make sure your assets are properly transferred into the trust and verify that the trust is correctly structured, which is particularly important in California, where estate planning laws are frequently updated.

An attorney can also provide guidance on the appropriate language and procedures for transferring various types of assets, such as real estate and retirement accounts, to maintain accuracy and comply with California law.

Use an Inventory System

To enhance the effectiveness of your trust, consider creating a detailed inventory of all your assets before you fund your trust. This should include every asset, including but not limited to the following:

• Real estate

• Bank accounts

• Vehicles

• Stocks

• Bonds

• Retirement accounts

• Life insurance policies

• And business interests

An inventory can help you identify which assets need to be transferred into the trust and if any assets have been overlooked. An experienced attorney can often help you create and maintain an accurate inventory.

Retitle Your Assets to Reflect the Trust

One of the most common mistakes in trust funding is failing to retitle assets in the name of the trust. For assets such as bank accounts, real estate, and vehicles, you will need to update the title once they have been moved into the trust.

For example, if you have a house, the title should be changed from your name to the name of the trust. Your attorney can help you properly update any titles and assets.

Update Your Beneficiary Designations

Certain assets, such as life insurance policies and retirement accounts, don’t require retitling since they’re governed by beneficiary designations. However, it's important to make sure your beneficiary designations are updated to reflect the trust as the beneficiary. 

Failing to do so could result in your assets passing outside of the trust, making them subject to probate after your passing. Your attorney can help you review and update these designations to align with your overall estate plan.

Keep Your Trust Funded Over Time

Funding a trust isn’t a one-time process. You should regularly review your trust to make sure new assets are added and that any changes in your life, such as acquiring new property or investments, are accurately reflected. Keeping your trust funded is essential for it to continue serving its purpose and for your estate plan to remain up-to-date.

How Can a Trust Attorney Help?

While you may be able to fund your trust without legal assistance, working with an experienced estate planning attorney offers several key benefits. Some of the key reasons a trust attorney is crucial for effective trust funding in California include the following.

• Knowledge of California law: An attorney has extensive knowledge of California’s trust laws and can guide you through the process of funding your trust. They’ll help you understand the legal implications of each decision you make and provide strategies for transferring your assets. 

• Avoiding mistakes: Funding a trust is an elaborate process, but a trust attorney can help you avoid common mistakes, such as failing to retitle assets or incorrectly designating beneficiaries. These errors can undermine your estate plan and may result in your assets being subject to probate.

• Providing peace of mind: A trust attorney can give you peace of mind that your trust will be handled correctly. You can be confident that your estate plan will be set up to work as intended, that your assets are properly transferred into the trust, and that your beneficiaries will inherit your estate without the need for probate. 

Common Mistakes to Avoid When Funding a Trust in California

Even with the help of an attorney, it’s still possible to make mistakes during the trust funding process. Here are some common mistakes to watch out for:

• Failing to transfer all assets: It's important to transfer all applicable assets into your trust. Failing to transfer your assets could result in them being subject to probate, potentially leading to complications for your beneficiaries. Make sure all your assets, including those acquired after the trust was established, are properly transferred.

• Neglecting to update your beneficiary designations: Trusts don’t automatically override your beneficiary designations for life insurance policies, retirement accounts, or other assets governed by beneficiary designations. Failing to update these designations could result in your assets bypassing the trust and being distributed to the wrong beneficiary.

• Not working with an attorney: Trust funding is an elaborate process, and attempting to do it on your own without legal guidance can lead to costly errors. A trust attorney can help you avoid common mistakes and make sure your trust is completed and properly funded.

Experienced Estate Planning & Trust Attorney in Rocklin, California

Setting up a trust is a significant step for providing for your loved ones after your passing. However, trusts are only effective if they are funded properly. That's where the skills and experience of an estate planning attorney come into play.

A skilled trust attorney can help you fully fund your trust, protect your assets, and make sure your beneficiaries will receive their inheritance in a timely manner. Located in Rocklin, California, the Law Office of Geoffrey Fong serves clients in Roseville, Folsom, Citrus Heights, and the surrounding areas. Reach out today to schedule a consultation.