A trust works similarly to a safety deposit box – it can protect your assets, but you must put something inside it first. If you forget to put or transfer your valuables inside, the box is just an empty container.
Funding a trust simply means transferring assets into the trust. Essentially, you give the trust legal ownership of all the assets used to fund it.
Assets you can use to fund a trust
You can generally use various types of assets to fund revocable and irrevocable trusts. However, there are also types of trusts you can only fund with a specific type of asset. For example, a life insurance trust can only own life insurance policies, while a land trust can only hold land, a house or similar real estate.
How to fund a trust
The process of funding trusts is not always the same or straightforward. How you fund a trust generally depends on what asset you plan to transfer into your trust. Below is a brief guide on how to fund a trust with different types of assets:
- Real estate property: Get a new deed to transfer ownership of the title to the trust. You can use a quitclaim deed for this, then file the deed at the local county recorder’s office.
- Vehicles: Accomplish an application for a certificate of motor vehicle title and get a new title issued by the Florida Department of Motor Vehicles (DMV).
- Bank accounts: Contact your bank to get a Certificate of Trust and request to transfer the account ownership to the trust. Alternatively, you can open a new bank account in the name of the trust and then transfer the funds afterward.
- Stocks and bonds: Ask your broker to re-register the stock or bond in the name of the trust.
- Life insurance: Contact your life insurance provider and request to change the policy owner or beneficiary of the insurance policy to the trust.
Avoid mistakes in funding trusts
Funding trusts can be challenging. Mistakes can result in the law not counting your assets as part of the trust, potentially leading to unwanted tax or legal complications. Consulting a legal professional may help you avoid common pitfalls and ensure you set up your trust properly.
