Last Will and Testament Articles >> Funding Your Living Trust to Avoid Probate

Funding Your Living Trust
to Avoid Probate

Funding is the more challenging part of setting up your living trust. Creating a living trust is simple, especially with the help of the informative booklets and straightforward forms available on CreateMyLivingTrust.com. To fund a living trust however, you must assess and transfer your property out of your name and into the trust which can be a bit more complicated than our simple forms.

Funding a Living Trust

Fortunately, you don’t have to fund a living trust immediately if you have a revocable living trust nor do you have to include everything you own. What you include in your revocable living trust is up to you, but as the trust protects your estate from probate, it is wise to include as many real property and substantial accounts as possible.

Avoiding Probate with Living Trusts

A living trust does not go through probate as a will does. When you pass, if you leave the distribution of your assets covered in a will, your property will be tied up in probate court for months or years before your beneficiaries are able to receive it. On top of the long delays, the probate court will charge fees anywhere from 2-4% of the estate total making the huge delay very costly.

A living trust is a means to avoid probate, but only if you fund a living trust with the assets that would otherwise be subjected to probate. To properly fund a living trust, you should transfer the title of all real property and accounts to the fund. If you are set up as the trustee on the fund, which you most likely are, you remain in complete control of your property as it is just in the name of the fund under your care rather than owned by you as an individual.

To transfer a title or sign any documents under your living trust, you can no longer simply sign your name. You’ll now sign your home over from “John Smith” to your trust as “John Smith as trustee of the John Smith Revocable Living Trust dated March 12, 20xx.” Get used to the new lengthy signature as you’ll be using it frequently for any transactions on the trust’s behalf.

Protecting Your Assets

The more assets you sign over to your trust, the less complicated and intrusive probate will be. You can include any assets you like, but some items such as 401k and IRAs might have better tax advantages outside of a trust. You can, however, make your trust the beneficiary for these items upon your death. This essentially wraps your funds up neatly into a single probate-free package if you prefer this and tax conditions determine it is a good step for you.

In addition, spouses should consider making themselves co trustees of any funds to maximize estate tax benefits if they take advantage of certain types of living trusts and to be sure the surviving spouse has no delay or even inconvenience in using or managing assets in the trust.

Learn more about revocable and irrevocable living trusts and additional tax advantages in other Create My Living Trust articles. Or, if you’re ready to start working to protect your property from probate, download our complete packet of living will documents for your state.