The Importance of Transferring Assets to Fund a Trust
If you’ve set up a trust or are considering doing so, it's important to understand how to fund it. Funding a trust refers to the process of transferring assets into the trust, which enables the trust to fulfill its intended purpose and allows you to better protect your financial legacy.
At The Nice Law Firm, we have helped clients in Indianapolis, Indiana, and the surrounding areas with estate planning matters since 1992. Our clients typically have several questions when it comes to funding a trust, and our attorneys are committed to explaining the steps you should take and how to turn a plan into action.
What Does It Mean to Fund a Trust?
When you set up a trust, think of it as creating a treasure chest for your assets. However, the chest doesn’t automatically fill up just because you took the time to build it. Funding a trust means transferring ownership of assets to the trust. Without proper funding, your trust will essentially remain empty, which will prevent it from serving its intended purpose.
When properly funded, the trust becomes the legal owner of your property. You can then streamline the process of managing those assets while you’re alive and make sure they pass smoothly to your beneficiaries when the time comes.
Types of Assets That Can Be Transferred into a Trust
Not every asset you own should or can be transferred into a trust. Therefore, it's essential to distinguish between your available assets and create a plan for transferring your eligible assets. Some of the most common types of assets that can be transferred into a trust include the following.
Real estate: Homes, vacation properties, and land can be easily transferred into the trust name. This protects these high-value assets while also removing them from the probate process.
Financial accounts: Savings accounts, non-retirement brokerage accounts, and certificates of deposit (CDs) are commonly retitled into a trust’s name. To prevent any unintended outcomes, it is important to follow clear and specific guidelines when managing joint accounts.
Vehicles: Depending on your situation, cars, boats, and other vehicles might also be placed into the trust. Indiana has specific laws surrounding this, so it’s worth reviewing with legal counsel.
Personal property: Artwork, jewelry, collectibles, and other valuable items can often be added to a trust to protect them for future generations.
Business ownership interests: If you own a business, transferring your interest into the trust could streamline governance or prepare for succession planning.
Certain assets, such as retirement accounts or life insurance policies, often function more effectively when designated as beneficiaries of the trust rather than being retitled to the trust. This helps you avoid tax complications that could negatively impact your estate.
Benefits of Funding a Trust
There are several benefits to transferring assets into a trust. A properly funded trust can avoid lengthy court processes, such as probate. This offers significant benefits to your loved ones, saving them time, headaches, and even expenses after your passing.
Additionally, funding a trust makes your estate planning intentions more secure. Since ownership of the assets is legally transferred to the trust, it’s far less likely that these assets could be disputed or mishandled.
Funding a trust simplifies the ongoing management of your estate, which is especially helpful if your trust includes provisions for minors, family members with special needs, or charitable donations.
Steps to Take to Fund a Trust
The process of transferring assets into a trust may vary depending on the type of assets being transferred. However, the general steps you will need to consider typically involve the following.
Identify your assets: Create a list of the assets you want to include in the trust. Evaluate each item’s paperwork, including deeds, titles, or account numbers.
Retitle asset ownership: For many assets, you will need to transfer ownership by retitling them in the trust's name. For example, you might work with your bank or financial institution to create new account paperwork or file a new deed with the county for real estate.
Notify financial institutions and other relevant parties: If you’re working with investment firms, banks, or other parties that manage your assets, they need to be informed about the ownership change. In most cases, they will require trust documentation to process the update.
Update your beneficiary designations: Make sure your trust is designated as the beneficiary for assets such as retirement accounts, if this aligns with your estate planning goals.
Organize documentation: Keep clear records of all changes. Maintaining a well-organized file of deeds, account balances, and trust agreements simplifies future management and prevents confusion.
Periodic review: Over time, your circumstances will change. New assets you acquire should be evaluated to determine whether they are suitable for inclusion in your trust. Regularly review your plan to make sure it remains effective and up-to-date.
Indiana Laws and Regulations Governing Trusts
In Indiana, trusts are regulated by the Indiana Trust Code, which provides detailed guidelines on their creation, management, and taxation. Indiana law also specifies rules for managing and distributing assets if you become incapacitated.
For example, Indiana allows for the creation of revocable living trusts, which remain a popular choice because they allow you to adjust the terms or assets. However, you could encounter certain tax implications depending on how your assets are titled or what type of trust you’ve established.
Estate Planning Attorney Serving Indianapolis, Indiana
Estate planning is about protecting your wealth and assets for future generations. While it can seem daunting to get started, you don't have to do it alone. At The Nice Law Firm, our experienced attorneys have helped Indiana residents with comprehensive estate planning solutions since 1992.
With over three decades of practice, our mission is to provide services that align with your goals at every step. Located in Indianapolis, Indiana, we serve clients in Scottsburg, Terre Haute, Kokomo, Martinsville, Lebanon, and Greenville. Contact one of our offices today to schedule a free initial consultation.
