In Florida, a trust is not valid until funded. Many trusts need to be funded prior to your death to be used in the way intended. Often, individuals create trusts and forget to fund them during their life and do not receive the benefits that their trusts were designed for. There are 4 major ways to fund a trust.
- Purchase items in the name of the trust. New property or items can be purchased in the name of the trust. When you purchase a new item or asset, the sale can be made out to the trust. Anyone can purchase these items, it need not be the creator or settlor of the trust.
- Assign items to the trust. Generally, when a trust is created, many items can be transferred to the trust by the use of an assignment of personal property. This document will transfer personal property which does not require a deed or title to the trust. This is good for personal property like clothing, jewelry, and other minor issues. One needs to be careful not to assign firearms to your trust unless it is a gun trust as many traditional trusts do not properly deal with firearms issues properly and can cause legal and criminal issues for those who survive you. If you sign an assignment of personal property, you should exclude firearms unless it is to a gun trust.
- Change the ownership of an item to the trust. Bank accounts, stock accounts, life insurance, annuities and other assets can be transferred to a trust by changing the ownership of the account. When the taxpayer ID remains the same, it is generally not a taxable event. This is the case for revocable trusts and some irrevocable trusts like an iPug™ Asset Protection trust. With some assets like real property or vehicles, the deed or title to the property will have to be changed. In most cases, other than with Vehicle Trusts, it is not recommended to transfer a vehicle to a trust because of the liability that is associated with the ownership of a vehicle in many states like Florida.
- Change the beneficiary of an item to a trust. This does not initially fund a trust, but can be used for certain items like retirement accounts. While in the past some lawyers, CPAs, and financial advisors might have recommended against naming a trust as a beneficiary of a retirement account, it is now recommended because of the additional flexibility and asset protection a trust can offer due to a Supreme court ruling that removed asset protection from inherited IRAs where the beneficiary did not live in Florida at the time of inheritance.
When you have multiple trusts it is important to understand which assets should be transferred to which trust. Generally, if you only have a revocable trust, most assets will be transferred to the revocable trust. When using an iPug™ trust, your checking or assets representing income and where your expenses are paid from should be transferred to a revocable trust and other remaining assets will be transferred to your iPug™ trust. Because in Florida ones homestead has asset protection it is typically transferred using a deed to a revocable trust and other real estate is transferred to ones iPug™ trust.
Funding a trust can be complicated and should be discussed with a Florida estate planning or an Elder law attorney who help to design the trusts.