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Creating a trust is a crucial step in building a comprehensive Florida estate plan, but it’s only the beginning. Many people mistakenly believe that signing the trust document automatically places their assets into the trust. However, without funding your trust, your assets could still go through probate—the thing most people seek to avoid with a trust. Below, we’ll explain trust funding, why it’s essential, and how to complete this process effectively.
What Is Trust Funding?
Trust funding is the process of transferring your assets into the trust you’ve created. Simply drafting and signing a trust document isn’t enough; the trust document is essentially a set of instructions for managing and distributing your assets. To make those instructions effective, you must either retitle or transfer ownership of your assets into the name of the trust. This process can also involve naming the trust as a beneficiary for certain accounts or assets.
Without properly funding your trust, your assets may remain in your name and must go through probate upon death. A common misconception is that a pour-over will—a will designed to transfer any remaining assets into your trust—eliminates the need for funding. While helpful, a pour-over will does not prevent probate; it merely directs the probate court to transfer assets into your trust after completing the probate process.
Steps to Properly Fund Your Trust
1. Real Estate
In Florida, a common way to fund real estate into a trust is through a Lady Bird deed. This type of deed allows you to retain ownership and control of the property during your lifetime while naming the trust as the beneficiary upon your death. Alternatively, some Florida estate planning attorneys may use a general warranty deed to retitle the property directly into the name of the trust. This ensures that the trust legally owns the property and avoids probate.
2. Bank Accounts
For bank accounts, you have a couple of options:
Retitle Existing Accounts: You can retitle an existing account so your trust owns it. This often requires providing the bank with a certificate of trust, a document summarizing key details about your trust without exposing its full contents.
Open a New Trust Account: You can also open a new bank account in the name of your trust.
Name the Trust as a Beneficiary: For accounts you wish to keep in your name—such as those receiving direct deposits—you can list the trust as the “Payable on Death (POD)” or “Transfer on Death (TOD)” beneficiary.
3. Investment Accounts
Another important step is titling investment accounts, such as brokerage or money market accounts, into the trust’s name. Similar to bank accounts, this typically involves providing the financial institution with a certificate of trust. Once completed, the trust becomes the legal owner of the account, ensuring seamless transfer to your beneficiaries.
4. Business Interests
If you own a business, such as an LLC or shares in a corporation, these can be assigned to your trust. While the business retains its name, the ownership interest—such as membership units or stock—is transferred to the trust. This allows the business interest to bypass probate and transfer directly according to the terms of your trust.
5. Intellectual Property and Other Assets
Other types of assets, such as copyrights, trademarks, or life insurance policies, can also be transferred into your trust. This typically involves executing an assignment form or updating the beneficiary designation to name your trust.
The Consequences of Not Funding Your Trust
If you fail to fund your trust properly, any assets left outside the trust will still be subject to probate, even if you have a pour-over will. After the probate process is complete, the pour-over will merely instruct the probate court to deposit those assets into your trust. This defeats one of the primary purposes of creating a trust: avoiding the delays, expenses, and public nature of probate.
By taking the necessary steps to fund your trust, you ensure that your Florida estate plan operates as intended, providing your loved ones with a smoother, more efficient transfer of assets after your passing.
Contact a Florida Estate Planning Attorney Today
Trust funding is a complex but essential step in creating an effective Florida estate plan. To ensure your trust is properly funded and your assets are protected, contact an experienced Florida estate planning lawyer. The knowledgeable atCause Law Office team can guide you through every aspect of estate planning, including trust funding, asset protection, and probate avoidance.
Call us today at 727-477-2255 to schedule a consultation with a Florida estate planning attorney who understands your unique needs. Don’t leave your estate to chance—let us help you build a secure future for your family.
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