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Considerations in Trust Funding

Considerations in Trust Funding

Presented by CYRS Wealth Advisors

 

A trust is a common estate planning tool that seeks to manage and control the distribution of your assets in the event of your death or incapacity. But as effective as trusts can be in managing assets, they can be completely ineffective if not properly funded. So, trust funding is a vital aspect of ensuring that the trust performs its intended role.

 

Many people incorrectly assume that trust funding is complete once the trust document has been signed at their attorney’s office; however, executing the trust document is only the beginning. For a trust to function, the trustee must hold title to the assets owned by and therefore subject to trust provisions; consequently, each asset to be owned by the trust must be re-titled to reflect trust ownership. Failure to transfer assets to the trust defeats its management purpose and, in the future, could expose trust assets to the unnecessary time and expenses associated with probate.

 

What types of assets can be owned by a trust?
A trust can own several different types of property, among them:

 

·       Cash and liquid securities, including checking accounts, savings accounts, certificates of deposit, and money markets.

·       Non-retirement brokerage and mutual fund accounts

·       Physical stock and bond certificates

·       Personal property, such as jewelry, furniture, art, and collectibles

·       Nonqualified annuities

·       Life insurance contracts

·       Real estate

·       Business interests

·       Notes and other debt instruments

 

How do you transfer ownership of property to a trust?

For most assets, transferring ownership is relatively simple:

 

·       Bank and brokerage accounts typically require completion of new account paperwork in the name of the trust, along with signed authorization to re-title or transfer assets from the current account to the trust.

·       Physical stock and bond certificates require a change of ownership to be completed with the stock transfer agent or bond issuer.

·       Life insurance and annuity contracts also typically require submission of a change of ownership form to the contract issuer.

 

Some assets require more effort to properly change title:

 

·       Personal property without a legal certificate of title is commonly listed on a schedule accompanying the trust to reflect that the trust owns those assets.

·       Assets with certificates of legal title require that the owner quitclaim ownership interest in the asset to the trust. The attorney who drafts the trust should help you with the quitclaim process.

 

Other considerations

To avoid unintended consequences, it is very important to fund the trust in a timely manner. It is also important to work with your attorney and advisor when determining which property the trust should own. There are several variations of trusts, and each trust may have a specific role in the estate plan and require specific assets to fund specific trusts.

This award was issued on 10/1/23 by Five Star Professional (FSP) for the time period 1/9/23 through 7/31/23. Fee paid for use of marketing materials. Self-completed questionnaire was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria. 5,549 Chicago-area wealth managers were considered for the award; 405 (7% of candidates) were named 2023 Five Star Wealth Managers. The following prior year statistics use this format: YEAR: # Considered, # Winners, % of candidates, Issued Date, Research Period. 2022: 4912, 384, 8%, 10/1/22, 1/24/22 - 7/29/22; 2021: 5635, 382, 7%, 10/1/21, 12/28/20 - 8/6/21; 2020: 4636, 356, 8%, 10/1/20, 1/6/20 - 8/7/20; 2019: 5430, 429, 8%, 10/1/19, 1/7/19 - 8/9/19; 2018: 5449, 435, 8%, 10/1/18, 1/12/18 - 8/17/18; 2017: 3781, 438, 12%, 10/1/17, 12/16/16 - 8/3/17; 2016: 3411, 725, 21%, 9/1/16, 2/26/16 - 8/19/16; 2015: 5833, 716, 12%, 10/1/15, 2/4/15 - 8/3/15; 2014: 8161, 744, 9%, 10/1/14, 2/4/13 - 8/3/13; 2013: 3998, 772, 19%, 10/1/13, 2/4/12 - 8/3/12; 2012: 2970, 780, 26%, 10/1/12, 2/4/11 - 8/3/11.
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*Winners appearing on this page do not pay a fee to be considered or to win the Five Star Award. Professionals with a digital profile have paid a promotional fee.
Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award is based on 10 objective criteria. Eligibility criteria-required: 1. Credentialed as a registered investment adviser (RIA) or a registered investment adviser representative; 2. Actively licensed as a RIA or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by FSP, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or FSP's consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through FSP's consumer complaint process; feedback may not be representative of any one client's experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria-considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. FSP does not evaluate quality of services provided to clients. The award is not indicative of the wealth manager's future performance . Wealth Managers may or may not use discretion in their practice and therefore may not manage their clients' assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by FSP or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by FSP in the future. Visit www.fivestarprofessional.com.