Funding A Living Trust
After documents are signed, this crucial step requires changing the owners on titled assets from the person's name to the living trust's name.
Assets in the name of a business owned by the grantor are not transferred into the living trust.
Real estate - new deeds will be required transferring real estate from the person's name to the living trust. Contact a title company or realtor in the county the property resides to prepare the deed. Real estate from other states may be placed in a Texas living trust.
Bank accounts - take the trust documents to the financial institution. This process typically takes less than a half hour. Many banks do not require you to change account numbers nor change the name on personal checks.
Vehicles - take the trust documents to the motor vehicle department, which will issue new vehicle titles reflecting the living trust as the owner
Taxable investments - contact the financial institution with your investments and inquire what documentation they require to transfer assets into the living trust.
Tax-deferred investments - IRAs, 401(k)'s and similar investments are not transferred into the living trust. Changing ownership is similar to cashing out the account, causing a taxable event. The living trust can be listed as a beneficiary to dictate the distribution terms but talk with your attorney and financial advisor to determine if the living trust would affect the beneficiary's ability to stretch the IRA.
Life insurance - the policy can be left in the owner's name but the living trust can be listed as a beneficiary to handle the distribution and control of the payout. Money paid out to the living trust must be used to settle debts with creditors. However, money paid directly from the insurance company to the beneficiaries is not subject to claims by the creditors. Consult with your attorney and financial advisor on the best way to list your beneficiaries.
Consult your estate planning attorney, your insurance advisor and financial advisor before changing titles on any assets to ensure the change to the living trust meets your estate planning goals and does not create any undesired taxable events.
