Funding Your Revocable Trust
Revocable trusts, also known as “living trusts”, can offer notable benefits including probate avoidance and asset management if you become incapacitated. However, these benefits will not be available if you do not fund your trust. Read on to learn more about revocable trusts and why funding your trust is a critical part of the estate planning process.
What is a revocable trust?
Your revocable trust acts as a substitute for your will, although you will still need to have a short will, which is sometimes referred to as a “pour over will”. Your revocable trust will hold assets for your benefit during your lifetime. You can choose to be your own trustee or you can select someone else. If you decide to take on the role of trustee, you will need to name a successor trustee to take on the role at the time of your death. The successor trustee would serve a similar role to that of an executor.
You will retain the right to revoke the trust and appoint or remove trustees whether or not you decide to serve as trustee. If you choose to name a professional trustee to manage your trust assets, you can require that the trustee consults with you before selling or buying any assets.
Keep in mind that taxes must be paid on any income that the trust earns but the trust isn’t required to file an income tax return until after you pass away.
Funding your revocable trust
In order to fund your trust, you must transfer the ownership of assets to the trust. Asset ownership transfers can include bank accounts, investments, real estate, business interests, personal property and vehicles.
Keep in mind that certain assets should not be transferred to a revocable trust. For example, if you move an IRA or qualified retirement plan to your revocable trust, it can trigger tax consequences It can also be a good idea to hold your life insurance policy in an irrevocable life insurance trust to protect the proceeds from estate taxes.
Transfer new assets to your trust
To make the most of your revocable trust, make sure you continue to transfer assets into it. In addition to funding your trust when it is first established, you will also want to transfer new assets to the trust as they are acquired so that they will receive the trust’s benefits.
We can help
The experienced revocable trust attorneys at Fingeret Law in Pittsburgh can help you to plan for the future. To discuss your specific needs and to find out how we can help, please call us at 412.281.8222 or contact us online.