Many people choose to include a living trust in their estate plan to help keep their assets out of the often slow probate process, while still retaining the flexibility to access those assets should they need to.
For a living trust to be effective, you need to ensure that you put your assets into it, which is known as funding the trust. There are several ways to do this.
Make the trust the beneficiary of an asset
Some assets require you to designate a beneficiary to receive them when you pass away. Examples include life insurance and 401(k) retirement plans. The money is then paid straight to that beneficiary upon your death, and this instruction supersedes anything you write about that asset in your will.
The beneficiary does not need to be a person. It can be your living trust. You can name it as the primary beneficiary, or as a secondary beneficiary in case your primary one cannot or does not want to accept the inheritance.
Make the trust the titleholder
If you own a house, you are likely the title holder on the deeds. You may currently be the titleholder of other assets, too, such as bank accounts, bonds, non-IRAs or non-401(k) retirement plans. You can fund the trust with these by making it the titleholder.
Make the trust the legal owner
You can make the trust the legal owner of certain assets by writing it in a legal document. It could be a separate document, or you could annotate it in the trust document itself. For example, you could make the trust the owner of that painting you have on your wall or the antique furniture you have stored in the barn. You can also give the trust ownership of certain non-objects, such as royalties or mineral rights.
Learning more about how trusts and other estate planning tools work can help you prepare a more effective estate plan.