When creating a trust in California, one of the first things you will need to do is fund it. In other words, you need to ensure that it can sustain itself once you’ve transferred ownership. There are several ways to do this depending on your goals, but the common methods include:
You can name your trust as the owner and beneficiary of the policy. This will give your trustee total control over your life insurance and its proceeds. If you created a revocable living trust, you’d still be the one in control until your passing; thereafter, your successor trustee will take over.
Retirement accounts or investments
You can also name your trust as the primary or contingent beneficiary of your retirement accounts and investments. This method could require you to close an account and open it in the name of the trust. If this is your preferred option, it is advisable to wait until your Certificate of Deposit matures, i.e., if you are working with a bank. A quick transfer could lead to penalties.
You can retitle your interests in an LLC, partnership, or corporation into your trust. However, it’s crucial to revisit your LLC’s operating agreement, partnership agreement, or article of incorporation to see if there are any rules that could hinder this transfer.
Assets that cannot fund a trust
You must take account of all your assets and liabilities when estate planning in California. But, you should note that a trust is not the ultimate solution. You cannot transfer some properties into a trust because they wouldn’t sustain themselves. For example, you cannot use an annuity, social security benefits, or your car.
Trust can be the best estate planning tool at your disposal, but only if you use it right. If you have assets you are confident can sustain themselves, creating a trust could be one of the best ways to protect them for you and your loved ones.