Florida Elder Law & Estate Planning Blog


Tips on Funding Your Living Trust

When planning their estates, many Florida residents opt to create a revocable living trust. A revocable trust has many benefits: It can spare your family the hassle and expense of dealing with the probate court; provide privacy; protect you from guardianship if you become incapacitated; allow you to set some conditions over when and how your beneficiaries receive their inheritances; and in some cases, provide tax advantages.

But in order for you and your family to reap these benefits,  your trust must be funded. Without funding, the most thoughtfully designed trust is like an expensive new car with an empty gas tank: It may look good, but it won’t get you anywhere. Many people mistakenly think they have all the protections of a trust (often these are people who have used do-it-yourself forms) but actually have none because they failed to complete the funding step.

Funding is simply the retitling (renaming) of assets into the name of your revocable living trust. In other words, your revocable trust becomes the owner of the assets. For example, a bank account owned by Mary Doe would become a bank account owned by the Mary Doe Revocable Trust. See below for some frequently asked questions about funding.

Do I still have control over assets I place in my trust?

If you are the initial trustee of your living trust, yes, you still have full control over all the assets in your trust and you can buy, sell and manage them just as before.

Exactly what do I need to do to fund my trust?

The process requires some phone calls and paperwork. You will call your banks and brokerages and ask them to change the titling on assets. Financial institutions usually ask you to provide them with proof that the trust actually exists. The Karp Law Firm will give you the necessary documentation for this purpose. The documentation shows that you have established your trust, but does not divulge the trust provisions, thus protecting your privacy.

Will the Karp Law Firm fund my trust?

It is not necessary and not cost-effective for you to pay us to do this administrative task. Instead, we will provide you with instructions on how to fund your trust. We are always here for you if you have questions or run into any difficulties. However, we do prepare deeds to re-title any Florida real estate you own. We also work with out-of-state attorneys to assist with re-titling any out-of-state property.

What about my home?

The deeds to your home should be changed to reflect that your living trust now holds the home. If this is not done, the property will need to go through probate when you pass away. If there is a mortgage on property that is not homestead property, you should tell your lender that you wish to transfer the property to your trust, and secure the lender’s permission.

If I own a home not in Florida, can I put it in my Florida trust?

Out-of-state real property should be retitled in the name of your trust. If this is not done, the property will require ancillary probate – in other words, it will have to be probated in the state in which it is located. You will have to retain an attorney in that state to prepare the deed.

What happens if  I forget to transfer an asset into my trust?

At the Karp Law Firm, when we create your revocable trust, we also create a “pourover” will for you. If any assets that are not co-owned or beneficiary-designated are mistakenly omitted from your trust, the pourover will directs those assets to to flow into your trust. That asset will have to go to probate first, and through the probate process will be assigned to your trust. The asset will then be distributed to beneficiaries according to the provisions of your trust. This process means your distributions remain private.

How is funding affected if my spouse and I have separate trusts? A joint trust?

There are a variety of issues that justify the creation of separate trusts – for example, tax planning, second marriages, inherited funds. Talk to your estate planning attorney about how to fund each trust.

Should I fund my trust with my retirement accounts?

No. Your tax-deferred retirement accounts such as 401Ks or IRAs should not be placed in your trust. Doing so will trigger negative tax consequences. You should have designated beneficiaries for these accounts.

Should I fund my trust with my life insurance?

Maybe. Talk to your estate planning attorney. The policy and the purpose for it should be examined to determine if it belongs in your trust, or if the trust should be the beneficiary of the policy.