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How to Fund a Trust

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Let’s dispel the myth that a trust when drafted automatically controls or holds property. It must be funded. Brenton and Greg talk about how to fund a trust with many types of property and assets.

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Transcript:

Greg McIntyre:

Hi, I’m Greg McIntyre with McIntyre Elder Law, and this is the Elder Law Report, our weekly show where we talk about legal issues that affect you and your family. Brenton, what’s our topic today?

Brenton Begley:

Well, we get a question all the time and that question is, how in the world do I put stuff in my trust? That’s a question that’s really important. It’s different for different assets. So, we want to tackle that topic today and really let everybody know how to fund your trust, which is pretty important because-

Greg McIntyre:

[crosstalk 00:00:35] so let’s say I go to an attorney and I say, “I want to draft a trust for my family.” The attorney agrees it’s the right thing, understands my goals, believes for tax purposes, for asset protection purposes, for liability protection purposes, and probate avoidance purposes, and maybe even for benefits qualification to pay for long-term care down the road, for those purposes, that it’s the right thing to do.

Brenton Begley:

Right.

Greg McIntyre:

And then the attorney drafts the trust for me and I have this trust in a nice trust binder, and I say that I want to have my house in that trust. I want to have some investment accounts in that trust. I talk about those being in the trust and how they’re disposed of within the trust. Does that mean that the trust automatically has control over those investment accounts or over my home?

Brenton Begley:

No, not at all. You have to put those assets in the trust. So, that’s part of, well that is funding your trust. So, let’s talk about the real property. Real property. You know, every piece of property in the United States has a deed associated with it, some type of deed charter, whatever. So-

Greg McIntyre:

Real estate, sure.

Brenton Begley:

Real estate. That’s right. To be able to put property into a trust, you have to title it in the name of your trust. So, your trust, if you have one, it has a name. For things to be in that trust name, right, you have to title them in the name. So, you have a deed and that deed will just go from you to your trust. So, you’re the grantor giving the property to your trust, the grantee. That is how you can put property in your trust. Now, you probably haven’t drafted a deed if you’re a layperson, so you need an attorney to do that. Thankfully for our clients, that’s one thing we do for them. We ask them what properties they want to put in the trust, or we suggest what properties they should put in the trust, and we do that part for them. We draft those deeds that go along with the trust and we record those and register deeds in the county in which that property is located to put that on record.

            But the investment property or the investment assets are a little bit different because they don’t have deeds. So, you have an investment account and that account is in someone’s name. It might be in your name, might be in your wife’s name, might be in both of your names. To be able to put that in the trust, you can do a couple of things. You can cash it out and open up another investment account in the trust and just transfer all of that cash over into the trust account. Or you can simply transfer the ownership of the account to the trust. Now-

Greg McIntyre:

That can be handled at the bank.

Brenton Begley:

That’s right.

Greg McIntyre:

Or a financial advisor, right? The financial advisor or a company where you hold those investment accounts can handle the transfer of the name of that. And they would want the trust document, to be able to see the trust, so you’d want to take the trust binder in. And really, they want on file generally the trust certification document, right?

Brenton Begley:

That’s right. [crosstalk 00:03:56]-

Greg McIntyre:

How is the trust certification document different than the larger, bigger trust?

Brenton Begley:

Yeah, trust certification document is [inaudible 00:04:05]. So, trust is a private document, and that’s important to know. It’s not registered anywhere, on file anywhere. It’s your private document that what you put in there can remain private. And that’s one of the benefits of a trust. So, you don’t want to have the full trust document on file somewhere because it’s private. That’s your private business.

Greg McIntyre:

Like the register of deeds, right?

Brenton Begley:

That’s right. That’s right.

Greg McIntyre:

It shows [crosstalk 00:04:30] that he has control of a property. I wouldn’t want to record the whole big fat detailed trust that told all the details. Right?

Brenton Begley:

That’s right. That’s right.

Greg McIntyre:

[crosstalk 00:04:37] business.

Brenton Begley:

Right. So, if something needs to be recorded, you can record the trust certification, which is a summary of your trust. And it goes over the basic elements of the trust that anyone would need to know to be able to prove that your trust exists, who the parties to the trust are, the type of trust that it is, and the powers that the trustees have over that trust, and generally what type of property it holds.

Greg McIntyre:

Understood. Understood.

Brenton Begley:

[crosstalk 00:05:05].

Greg McIntyre:

So, if I had a piece of real estate and I deeded that into the trust, I record that deed at the register of deeds, I would also want to record the trust certification document to show that the trustee now had control and how the trustee had control over that piece of land. And that’s in the public record and chain of title, right?

Brenton Begley:

Right.

Greg McIntyre:

And same thing with the bank. They’ll want a copy of that trust certification, but it’s a way that you can show the nuts and bolts, a summary of the trust without disclosing the entire trust or keeping it on record somewhere.

Brenton Begley:

That’s right. And it’s very important because a will is something that becomes public record. It gets filed in the courthouse and anyone can go and pull that file and take a look at it. But a trust, it’s different. You avoid having to deal with the courthouse, and you avoid having to go through that Probate process and you avoid having to subject your private wishes to public scrutiny.

Greg McIntyre:

Right.

Brenton Begley:

That’s one of the reasons why a trust is so beneficial, is you avoid the opportunity for outsiders to come in and challenge your estate plan, which is very important.

Greg McIntyre:

Sure. Absolutely. So, funding a trust, I just find that people have such a misconception generally-

Brenton Begley:

Yeah. [crosstalk 00:06:29]. One fear that a lot of people have is, and one question I get all the time is, “Hey, am I going to have to list out every dish, every picture, every chair, every rug, every piece of furniture that I have to be able to put all this stuff in the trust, because I don’t want all of that going through Probate.” So, let me ask you, what do we do to prevent that from being reality, where you have the list and inventory-

Greg McIntyre:

At the time you sign the trust, we have you sign an assignment of all personal property that’s non-titled assets like household assets, goods, things like that to the trust, so that we can go ahead and claim the protection of the trust. And so, the trust can handle those assets outside of the Probate process, which is a very nice luxury for a trust that we draft.

Brenton Begley:

Right. And it’s very important to have that along with the trust so that you know that all your personal items or non-titled assets are in the trust. Whatever you have now or hereafter acquire will go in there. But sometimes things are left out. Sometimes people make mistakes, they might get something and forget to put it into the trust. Is there any safeguard, safety net there to make sure assets pass by the terms of the trust if someone forgets to put something into the trust?

Greg McIntyre:

There is. We draft wills that go along with the trust that would take something that wasn’t in the trust and go ahead and put it in there at the time and let the trust do the heavy lifting. However, also we draft personal property memorandums with our trust as well that allow you to list assets that are in the trust that might get placed all the personal property in the trust, and then if you want to say, “You know, little Johnny gets the baseball card selection. My daughter Jane, she gets my doll collection and my china and other…” And so on and so forth. You can fill that part out at your leisure, with the more voluminous items. So, we try to make it as convenient as possible and explore funding with you and make sure you’re educated on funding.

            We also draft a letter that details how to fund a trust with any type of asset and put that in the front of your trust binder so that you can answer your own questions as the trust funding and anything else that you have left over, we’d be glad to answer those questions for you and help you with funding.

Brenton Begley:

That’s right.

Greg McIntyre:

So, if you have any questions on drafting trusts or funding trusts, call us at McIntyre Elder Law at 704-749-9244, or schedule your free consultation today at mcelderlaw.com. Thank you so much, Brenton, for helping me explore trust funding.

Brenton Begley:

Love to. Yeah.

 

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