Now That You Have A Trust, Fund It.

The First Step: Fund Your Trust

Asset protection guidance from an estate attorney is commonly used to achieve specific long term goals. One of the first step in helping clients achieve their goals is creating a wills and /or trust. Trusts are a valuable tool in the legal toolbox; capable of protecting assets and protecting against legal challenges in the future.

The creation of a trust is only the initial step in the process to creating lasting protection for your family. To be useful, however, a trust must be funded. The trust is funded when ownership of assets is transferred to the trust. While your legal team creates your trust and advises you on which assets should be moved into the trust’s protection, many clients decide to fund the trust themselves.

Want to learn more about funding your trust? Read this article for great tips and general information on funding your trust, but for your unique circumstances, please speak to an attorney.

What Are Trusts?

Trusts are legal entities created by an estate attorney. It is designed to own assets on behalf of a beneficiary or beneficiaries. Documents that create trusts ensure the trust fully accomplishes the wishes of the person creating it, also known as the grantor.

Now that you have created your trust, what’s the first thing you should do? Fund it. This is a run, don’t walk situation. A living trust without funding is not effective. In some instances, such as a testamentary trust, the trust is funded upon the death of the grantor with the assets within their estate. This is not the case when it comes to living wills. Living wills require that assets be individually placed into the trust in order to fund it. The process of funding your trust should be a discussion between you and your attorney to ensure you receive maximum benefits and protection.

Why is a Trust Important?

The easiest ways to describe the benefits of trusts is to say a trust protects your assets, minimizes the burden of tax, they create and allows them to be more easily transferred without incurring estate taxes. When you place the ownership of an asset into a trust you retain control of these assets. In the event you become incapacitated or pass away, the assets will be administered by a trustee according to the terms of the trust you created.

Too often a living trust is legally created, but the assets are not placed into the trust. Assets not placed in the trust are not protected from probate and estate taxes. The benefits of the trust are only realized after the process of funding the trust is completed. It is only at this time that you may rest comfortably knowing that you have taken care of both yourself and your loved ones.

Different Types of Trusts

There are a wide number of trust types, and their laws may be different from state to state. This article will discuss trusts in general, as well as some of the reasons why people choose to establish their trusts in Nevada.

Domestic Asset Protection Trusts
Special Needs Trusts
Testamentary Trusts
Living Trusts
Revocable Trust
Irrevocable Trust

Trust Roles

A trust has guidelines to adhere to, and within those guidelines are three roles. These roles are the grantor, the trustee, and the beneficiary. Each have their responsibilities and duties.

Grantor
This is the person who establishes the trust. They may also be known as the “trustor” or “trust-maker” and will be transferring assets and property to the trust.

Trustee
In a trust there is a trustee and a successor trustee. This is the person, and the backup, for the person managing the trust. In the case of a living trust, this is often the same person who created the trust. Any person or entity can be a trustee. They have a fiduciary duty to protect the assets of the trust and that the purposes of the trust have been followed.

Successor Trustee
When a grantor is no longer able to serve as a trustee, whether due to illness, death, or incapacity, the successor trustee steps into the trustee role. They are the same rights, powers, and duties as the original trustee except when it comes to altering, amending, or revoking the living trust.

Beneficiary
These are the individual who are to receive the benefits of the trust assets. There are primary beneficiaries, who are the first to receive benefits and contingent beneficiaries. Primary beneficiaries are often a person’s spouse or partner. Contingent beneficiaries are entitled to receive benefits of the trust assets should the primary beneficiary be unavailable to receive them. For example, if the primary beneficiary passes away, the contingent beneficiary could then be designated to receive assets.

Costs
How much to set one up? Relatively speaking, the cost to secure the safety for your assets is minimal considering the protections a trust provides. Consider the unnecessary risks you are taking by leaving your valuable assets exposed to potential litigation, and taxes.

Nevada State Laws for Trusts

Nevada is known to have some of the most advantageous trust laws in the country.

A Domestic Asset Protection Trust (also called a DAPT) is a specific type of trust of which the creator of the trust is a discretionary beneficiary. Discretionary beneficiaries are specified to only receive distributions when they pass a certain age or achieve a milestone in education. Only 17 states in the U.S. have DAPT statutes. Out of these states, Nevada appears to have the most protective laws, as well as statutes of limitations when it comes to DAPT.

There are many specifics to this type of trust, but when it comes to protecting you with trusts, Nevada is a state that does a better job than most. Just remember that no matter how well we form these trusts to protect you, only the assets transferred into the trust will receive the statutory protections.

How to Move Assets into a Trust
FUNDING A TRUST 101

Before you begin placing any assets into your trust, you should carefully review all your assets. We will help you select the assets to be moved into the trust, and then prioritize them based on importance, value and the ease of moving them.

The types of assets use to fund a trust may include real estate, residential, commercial, or investment, bank accounts, securities, investment accounts, life insurance policies, and jewelry or fine art. During this exercise, your assets will be listed as either tangible or intangible. Tangible assets are generally able to assigned with a simple one page assignment. Intangible assets may require a little more work.

Contact Us

All of this is complex and it is very important to get these matters right. Contact Cunningham Law to take you through our process to create and fund your trust. We will make sure you and your assets are protected.