Funding a Trust in Maryland
Annapolis, Maryland Trust Funding Attorney
Experienced Trust Funding Lawyer Serving Anne Arundel County, Washington D.C., and Beyond
Trusts can be an incredibly effective estate planning tool for a number of reasons, but simply setting up a trust is not enough to ensure effective estate management. In order for a trust to serve any benefit, you must fund the trust properly.
Here at The Law Office of Raymond E. Brown, our experienced Annapolis estate planning attorneys are happy to provide in-depth guidance on the necessary steps to fund a trust in Maryland. Below, we’ll break down what trust funding means, how it is accomplished, and how it plays a pivotal role in securing your financial legacy.
To learn more about trust funding for your specific circumstances, call Attorney Raymond Brown at (443) 554-9944 or reach out online to set up a confidential consultation today.
What Does Funding a Trust Mean?
A trust is a very common and very beneficial part of an estate plan that can manage and distribute assets efficiently. This legal arrangement allows a grantor (the person creating the trust) to place assets into the ownership of the trust while a trustee oversees the management and distribution of the assets according to the grantor’s terms and conditions.
There are a number of different types of trusts available – from a revocable living trust to a special needs trust to a bypass trust and beyond – each serving a unique purpose to meet specific financial and estate planning needs.
Funding a trust simply means transferring assets into the trust document so that it effectively owns them. This is an essential part of the process for the trust to function as intended, as a trust without assets is merely a document with no practical effect.
You may use a variety of assets to fund your trust. A bank account is one of the most common. Other assets frequently used to fund trusts include real estate, investment portfolios, and personal property such as jewelry and art.
Why Funding a Trust is Important
There are a number of reasons why funding a trust is so important. Think of it this way: a trust that is not properly funded is like a pen with no ink or a treasure chest with no treasure. There is really no point in having it if it doesn’t have what it needs to be effective!
Below, we’ll explain in more detail how properly funding a trust can help avoid probate, protect assets, provide tax benefits, and ensure peace of mind for both yourself and your beneficiaries.
Bypassing the Probate Process
Properly funded trusts can significantly streamline the estate settlement process by helping to bypass the often lengthy and costly probate process. When assets are held in a trust, they are no longer considered part of an individual’s personal estate at their death and therefore, do not require probate to transfer legal ownership.
This means that the trust property can be distributed to beneficiaries according to the terms of the trust and without the delays, public record, and expenses associated with Maryland probate court. As a result, beneficiaries gain quicker access to the assets and the estate can maintain a greater degree of privacy.
Asset Management and Protection
Although the trust itself legally owns the assets you’ve transferred into it, you place them under the control of a trustee, whose duty it is to manage these assets according to the specific rules laid out in the trust agreement. This arrangement provides a structured approach to protecting and managing your assets.
What’s more, a trust can offer protection against creditors and legal judgments, keeping the assets safe from claims that might otherwise impact the financial security of the beneficiaries.
Estate Tax Benefits
Funding a trust can also offer several potential estate tax advantages. For instance, certain types of trusts – like an irrevocable living trust, for example – can remove assets from your taxable estate. This means that when you pass away, these assets will not be subject to estate taxes, potentially resulting in significant tax savings for your heirs.
Ensuring a Smooth Transition of Trust Assets
Another major benefit of having a properly funded trust is that you set up a predefined, orderly distribution based on the terms set forth in the trust, avoiding potential disputes and the delays often associated with probate. This method provides a clear roadmap for trustees on how and when assets should be distributed, which can help prevent misunderstandings and conflicts among named beneficiaries.
A trust also allows you to specify conditions under which beneficiaries receive assets, such as when minor children reach a certain age or achieve specific milestones. This provides even greater control when it comes to carrying out your intentions and timing preferences when you are no longer there to do so.
Types of Assets to Fund a Trust
We briefly touched on it before, but there are many types of assets that individuals may use to fund their trusts. Here are some of the most common:
- Real Estate: Homes, land, and other real property can be transferred into a trust by changing the deed to list the trust as the owner.
- Bank Accounts: Savings and checking accounts can be retitled into the name of the trust.
- Investment Accounts: This includes stocks, bonds, mutual funds, and brokerage accounts, which must be transferred to the trust.
- Business Interests: Shares in a business, limited liability company (LLC) interests, or partnership stakes can also be moved into a trust.
- Personal Property: Items like art, jewelry, collectibles, and other tangible items can be assigned to a trust.
- Life Insurance Policies: The trust can be named as the beneficiary of a life insurance policy, or the ownership of the policy itself can be transferred to the trust.
- Retirement Accounts: While more complex due to tax considerations, it’s possible to name the trust as a beneficiary of retirement accounts like IRAs and 401(k)s.
- Vehicles: Cars, boats, and other vehicles can be retitled in the name of the trust.
Each type of asset may require a different process for transfer, so it’s important to consult with an experienced Maryland trust attorney to ensure the transfers are done correctly and in accordance with local laws.
How is a Trust Funded?
To begin, the trust must be properly established and documented with a trust agreement that outlines things such as the terms, beneficiaries, and responsibilities of the trustee. Once in place, the titles of assets included in the trust should be changed from your personal name to the name of the trust.
For real estate, this means executing a new deed that transfers the property to the trust. For financial accounts, you’ll typically need to change the account holder information to reflect the trust’s ownership.
Each type of asset has specific requirements for how it should be transferred to the trust. For example, tangible personal property might require a bill of sale or a similar document to be officially transferred into the trust. It’s also incredibly important that you update your trust document as you acquire new assets or if your intentions for the assets change.
How To Fund a Trust: A Step-By-Step Guide
We know it can be confusing at first glance (and even several glances after that), so we’ve provided a clear step-by-step guide that can help you better understand how to go about funding a trust in Maryland.
Here’s a breakdown of the process:
- Identify Assets for Transfer: Start by identifying which assets you want to include in the trust.
- Identity Trustees: When creating a trust, you’ll need decide who will serve as the initial trustee to manage the trust’s assets. Most people choose themselves. In that case, you should also select a successor trustee who will take over management upon your death or incapacity. This person could be anyone from a spouse to a close friend to any number of trusted family members.
- Create or Review the Trust Document: Work with a knowledgeable estate planning attorney to create a trust document that specifies the terms of the trust, including the rights of the beneficiaries and the conditions under which the trust operates.
- Title Transfer for Real Estate: For real estate, you will need to prepare and record a new deed transferring ownership from your name to the trust’s name. This deed must be filed with the county land records office where the property is located.
- Change Titles and Beneficiary Designations: For assets like bank accounts and vehicles, you need to change the titles from your personal name to the name of the trust. For life insurance policies and retirement accounts, consider updating the beneficiary designations to the trust, if appropriate.
- Transfer Securities: If you have stocks, bonds, or other securities, contact your broker or investment advisor to re-register these assets in the name of the trust. This may require new account forms and additional documentation to be completed.
- Assign Personal Property: For tangible personal property (like art, jewelry, and collectibles), a simple assignment document can be sufficient to transfer ownership to the trust.
- Update Estate Plan as Needed: Once you’ve created your trust and transferred your assets, remember that you’ll need to update the trust regularly as you acquire new assets or your intentions change.
- Keep Records: It’s important that you maintain detailed records of all assets transferred into the trust, including documentation of any title changes and beneficiary updates. This will help in managing the trust and proving the proper funding of the trust in the future.
Common Mistakes in Trust Funding
When funding a trust, certain oversights can complicate the intended management and distribution of assets.
Here are some of the most common mistakes people make when funding a trust:
- Not funding the trust at all
- Incomplete or incorrect titling of assets
- Overlooking digital assets
- Forgetting to update the trust
- Neglecting to change beneficiary designations
- Omitting personal property
- Lack of coordination with overall estate plan
- Failing to consult with an estate planning attorney
Avoiding these mistakes requires careful planning, attention to detail, and often, professional legal guidance to make sure that the trust works as intended and provides the desired protection and benefits to the beneficiaries. To learn more about the do’s and don’ts of funding your trust in Maryland, call an Annapolis estate planning attorney at The Law Office of Raymond E. Brown today.
Why You Need an Experienced Maryland Trust Funding Attorney
Unlike wills, which only take effect upon death, trusts can manage assets during your lifetime and provide a seamless transition upon your passing. However, creating and properly funding a trust can be a complex process that requires careful planning and attention to detail.
An experienced Maryland trust funding attorney like Raymond E. Brown can guide you through the intricate process and steps involved in effectively transferring ownership of your assets into the trust, ensure that all the assets are properly titled and documented, and provide peace of mind that your wishes will be honored and your beneficiaries will receive their inheritances smoothly and efficiently.
Experienced Trust Funding Lawyer Serving Anne Arundel County, Washington D.C., and Beyond
There’s a lot to know regarding the ins and outs of creating a comprehensive estate plan, especially when it comes to trusts. What’s the difference between revocable living trusts and irrevocable trusts? Will my beneficiaries have to pay an inheritance tax on the assets once they receive them? Is a last will and testament enough to cover the size of my estate, or is a trust enough? What can I do to avoid probate? How do I make sure my trust is properly funded? These are just some of the many questions we hear on a regular basis at The Law Office of Raymond E. Brown.
The good news is that when you work with an experienced estate planning and administration attorney on our team, we can help answer all these questions and more, ensuring that every aspect of the estate planning process is streamlined and customized to your unique needs and concerns.
Our firm proudly provides clients throughout Anne Arundel County and the surrounding areas with full funding support to ensure their estate plan properly protects their assets, beneficiary distributions, and intentions. Not sure if your trust is properly funded? We can help! Simply call (443) 554-9944 or complete our online intake form to schedule a meeting with a member of our legal team today.
