Can a trust be funded with property instead of cash?

Absolutely, a trust can absolutely be funded with property – in fact, it’s a very common and often advantageous way to do it, and doesn’t always require a large cash infusion.

What Types of Property Can Be Used to Fund a Trust?

Many people assume trusts require large sums of cash, but that’s a misconception. You can fund a trust with a variety of assets, including real estate, stocks, bonds, mutual funds, and even personal property like valuable artwork or collectibles. For example, many clients transfer ownership of their rental properties into a trust, providing for continued management and eventual distribution according to the trust’s terms. In California, with the potential for property values to increase significantly, transferring ownership strategically can be a key part of estate planning. According to a recent study by the National Association of Realtors, roughly 85% of wealth is held in real estate, making it a primary asset for trust funding.

How Does Funding a Trust with Property Work?

The process involves legally transferring ownership of the property from your name to the trust. For real estate, this is typically done through a deed. The deed is prepared, signed, and recorded with the county recorder’s office. The exact procedures vary depending on the type of property and local regulations. For financial accounts, it usually involves changing the registration of the account to reflect the trust as the owner. It’s crucial to understand that simply *naming* a trust as a beneficiary isn’t enough – the trust must actually *own* the asset to avoid probate. This is where many people stumble, assuming beneficiary designations are sufficient, leading to complications and potential probate costs.

What are the Benefits of Funding a Trust with Property?

Funding a trust with property allows you to avoid probate, which can be a lengthy and expensive process in California. As of 2024, formal probate is required for estates over $184,500, and statutory fees for executors and attorneys can reach 4% of the gross estate value. Avoiding these fees can result in significant savings for your heirs. Furthermore, a trust provides greater control over how your property is distributed, ensuring your wishes are followed. It also offers privacy, as trust documents are not typically public record like wills in probate court. Community property laws in California also provide significant tax benefits; assets acquired during marriage are owned 50/50, and the surviving spouse benefits from a “double step-up” in basis for tax purposes.

A Story of What Happens When It’s Not Done Correctly

Old Man Tiber, a retired carpenter, had a beautiful little beach house in Oceanside. He thought he’d done everything right by simply listing his trust as the beneficiary on the deed. Unfortunately, when he passed away, his family found themselves embroiled in a costly and time-consuming probate battle. Because the deed hadn’t been properly transferred into the trust’s name, the house remained subject to probate. It took almost a year and significant legal fees to finally transfer the property to his children. It was a painful lesson in the importance of proper trust funding – a simple oversight costing his family thousands of dollars and a great deal of emotional distress.

A Story of How Proper Funding Provides Peace of Mind

Susan, a local school teacher, was concerned about ensuring her two children would be well cared for. She worked with an estate planning attorney to create a trust and properly funded it with her home, investment accounts, and a small rental property. When she unexpectedly passed away, her trustee was able to seamlessly manage her assets and provide for her children’s education and well-being without any court intervention. The process was smooth, efficient, and provided her family with the peace of mind knowing her wishes would be honored exactly as she intended. She was methodical and took the time to fully fund her trust, avoiding the heartache and expense her friend, Old Man Tiber, experienced.

If you’re considering creating or funding a trust, it’s essential to work with a knowledgeable estate planning attorney. They can guide you through the process, ensure your documents are properly prepared, and help you avoid costly mistakes.

Don’t leave the future of your assets to chance. Protect your family and your legacy with a well-crafted and properly funded trust.

Contact Steven F. Bliss ESQ. today at (951) 412-2800 to schedule a consultation and learn how we can help you achieve your estate planning goals.

Secure your future, protect your loved ones. Let Wildomar Probate Law guide you through the estate planning process with expertise and compassion.