Many people who have an estate plan have created a living trust (also known as a declaration of trust). But one thing many people forget is rather important: funding their trusts.
If you created the living trust (the grantor), then during your lifetime, you are the beneficiary and can use assets in your trust as you see fit. You are typically also the trustee during your lifetime while you are able to make financial decisions. The successor trustee who you name can use the trust assets for your benefit if you become incapacitated (and possibly for others depending on how you setup your trust). If you want your successor trustee to do that, you must be sure your trust is funded.
To fund the trust during your lifetime, you must change the title of certain assets you own to your name as trustee of your living trust. These assets might include real estate, bank accounts, stock and mutual fund accounts and/or businesses. The owner of the asset becomes you as trustee of your trust instead of you as an individual.
Another option is funding your trust at your death by making your trust the beneficiary of certain assets, such as life insurance proceeds. We advise clients to keep IRA assets in their own name and to name individuals as primary and contingent beneficiaries in most cases.
When you pass, the assets in the trust are administered for the benefit of your beneficiaries, who are named in the trust. Your will should state that your remaining assets will go into the trust. That way, you avoid your beneficiaries going through a long probate process to administer your assets.
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