Before it can accomplish its intended purpose, a trust must be properly funded by transferring assets into it. While many people immediately think of placing a home or investment account into a trust, numerous other assets may also be appropriate funding opportunities.
By thinking outside the box when funding a trust, you may find it is ultimately even more effective at helping you reach your financial and estate planning goals than you initially hoped.
Less common funding approaches
Real estate is often one of the first assets transferred into a trust because it can help simplify the transfer of ownership after death and, in many cases, allow assets to avoid probate. However, funding a trust does not have to stop there. Brokerage accounts, non-retirement investment portfolios, certificates of deposit and certain bank accounts may also be retitled in the name of a trust.
Business owners have additional opportunities to incorporate trusts into their estate plans. Membership interests in a limited liability company, shares of a closely held corporation or partnership interests may be transferred to a trust, subject to any governing agreements or legal restrictions. Doing so can support business succession planning while helping to preserve family wealth.
Some people also choose to assign valuable intellectual property to a trust. Copyrights, trademarks, patents, or royalty-producing rights may continue to generate income for beneficiaries long after a trust creator’s lifetime. Similarly, valuable collections, artwork, antiques and other tangible personal property may be transferred into a trust.
Life insurance can also play a role in trust funding. Depending on the type of trust at issue, either a policy itself or a death benefit may become part of an overall estate planning strategy. Certain trusts are specifically designed to hold life insurance for long-term planning purposes.
Effectively funding a trust does not need to be a formulaic process. By working with an experienced legal team, you can construct a trust – and fund it – in ways that meet your needs.