A revocable living trust is among the most common tools found in the average estate plan due in large part to the numerous and varied objectives you can achieve using one. If you decide to include a revocable living trust in your estate plan, you will need to fund that trust once the trust agreement is drafted. Toward that end, the Essex Junction attorneys at Unsworth LaPlante, PLLC discuss funding a revocable living trust in Vermont.
What Is a Revocable Living Trust?
A trust is a legal arrangement that is created using a trust agreement. Within the trust agreement, the Settlor (creator of the trust) appoints a Trustee to manage and protect assets intended to benefit a third-party beneficiary. All trusts are either a living trust or a testamentary trust. As the name implies, a living trust activates while the Settlor is alive, although it can continue after the Settlorâs death as well. A testamentary trust is activated by a provision in the Settlorâs Last Will and Testament after the death of the Settlor. If you create a living trust, you must also decide if the trust will be revocable or irrevocable. With a revocable living trust, the Settlor can modify or revoke the trust at any time and for any reason.
Funding Your Vermont Revocable Living Trust
Once your revocable living trust has been established, you need to fund the trust. Because a trust is a distinct legal entity, any assets used to fund the trust must be legally transferred into the trust. Knowing what assets are available to be used when funding your revocable living trust and what assets cannot, or should not, be used is important. Assets that can be used for funding your trust include:
- Financial accounts, including bank accounts, investment accounts, and safety deposit boxes.
- Real estate, including your home or land.
- Vehicles (in some states)
- Life insurance policies
- Oil and mineral rights.
- Intellectual property rights.
- Collectibles, such as an art or coin collection.
- Business assets/ownership if the business operates as a sole proprietorship or a partnership.
What Assets Cannot or Should Not Be Used to Fund My Trust?
Knowing what assets are not legally able to be transferred into a trust or that do not work well as funding for your trust is just as important as knowing what assets are commonly used to fund a Vermont revocable living trust. For example, because you are already allowed to use the funds tax-free, health savings and medical savings accounts cannot be transferred into a trust. While funds held in retirement accounts, such as an IRA or 401(k) can legally be transferred into a trust, they typically should not be because the transfer may be considered a withdrawal, triggering a taxable event in the eyes of the I.R.S. In a similar vein, bank accounts, including personal and business checking and savings, can be transferred into a revocable living trust; however, once the account becomes the property of the trust, the Trustee must authorize every single transaction. As such, unless you are the Trustee of the trust, it is usually best not to transfer these accounts into a revocable living trust. The same logic applies to other assets that you might need quick and regular access to, such as your vehicle. A vehicle can be part of the funding for your trust but remember that the trust will legally own the vehicle once the transfer is complete.
Do You Need Help Funding Your Vermont Revocable Living Trust?
For more information, please attend one of our upcoming FREE webinars. If you need additional assistance figuring out what can and cannot be used to fund your Vermont revocable living trust, contact an experienced Essex Junction trust attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.
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