If you are in the process of creating a Phoenix estate plan, you have probably heard the term “funding your trust.” You may be confused about what this phrase means, but it is important not to ignore it. Funding your trust is a crucial step in the estate planning process. Not funding your trust correctly is one of the biggest mistakes you can make.
Below is some general information about what funding your trust means and how to do it in Phoenix.
What is Funding a Trust in Phoenix?
Funding your trust in the process of transferring the ownership of your assets to your trust. The property mentioned in the trust document does not automatically transfer ownership when the document is signed. Instead, transferring the ownership of each asset is an active process that you must undertake together with your attorney.
Why is Funding a Trust Important in Phoenix?
You must fund a trust for it to be effective. Your trust will only control the property that you put in it. Assets that you do not transfer into the trust will remain your individual property, no matter what the trust document states. The assets that you thought would be governed by the trust will instead pass through probate and be governed by your will. If there is no will, Arizona’s intestate succession laws will decide what happens to the property. This has many different consequences, including:
- Probate can be expensive, time-consuming, and public.
- Your property may not end up with the individuals that you intended to leave it to. People you thought would be taken care of may be left with nothing.
- Asset management and protection goals will not be accomplished.
If you become incapacitated and your trust is not funded, your trustee will have no power over the assets. He or she will have to go through a court process to establish guardianship or conservatorship over the property, adding time and expense.
How Do You Fund a Trust in Phoenix?
Funding a trust in Phoenix is not difficult, but it can be time-consuming. You should review each asset with your attorney to understand what your responsibilities are. There are different requirements for each type of asset. Below is a list of common types of trust assets in Phoenix. Your attorney can give you specific instructions on how to transfer each individual asset into your trust.
- Bank Accounts: Reach out to your bank. Each banking institution has its own processes and paperwork. You will probably have to provide a Certificate of Trust, which is a summary of the trust provisions.
- Real Estate: Transfer the deed from your individual name to the trust. The deed must be executed according to Arizona law and recorded in the Maricopa County Recorder’s Office. You may have to notify your lender, homeowner’s association, or homeowner’s insurance of the change.
- Vehicles: Get a new title from the Arizona Department of Transportation that names the trust as the vehicle owner.
- Untitled Personal Property (furniture, jewelry, collectibles, etc.): Create an assignment of ownership document that lists the property and designates the trust as the owner. The assignment of ownership should be kept together with the trust document.
- Business Interests: Retitle the shares in the name of the trust. In addition to Arizona state law requirements, business records may specify additional requirements that you must follow when transferring shares.
- Securities (stocks, bonds, brokerage accounts, etc.): Speak to your broker about how to retitle your brokerage account or get stock or bond certificates reissued with the trust as the owner.
In addition to transferring ownership of assets into the trust, you should update beneficiary designations on accounts and policies, such as life insurance, retirement accounts, health savings accounts, and medical savings accounts. You should designate your trust as the beneficiary so that the assets will flow into the trust after your passing.
It is important not to procrastinate funding your trust. It is easy to get sidetracked and put off the task until it is too late. Not funding your trust properly is one of the biggest estate planning mistakes that people make in Phoenix.
Your Phoenix Estate Planning Attorney
If you have questions about trusts and would like to speak to a probate and estate planning lawyer, call Nicole Pavlik Law Firm. Nicole Pavlik is an experienced Phoenix estate planning attorney who can guide you through the trust funding process. Call Nicole Pavlik Law Firm today at 602-635-6176 to schedule a free consultation and discuss your estate planning needs.