Absolutely, a trust can most definitely be funded with property—real estate, stocks, bonds, vehicles, and other assets—rather than solely with cash. In fact, utilizing a variety of assets is a common and often advantageous way to establish and manage a trust effectively.
What types of property can I put into a trust?
The range of assets suitable for funding a trust is surprisingly broad. Beyond cash, you can transfer ownership of real estate—homes, land, rental properties—into the trust. Financial accounts like stocks, bonds, mutual funds, and brokerage accounts are also commonly transferred. Personal property, such as vehicles, artwork, collectibles, and even business interests, can be included. Life insurance policies can be owned by the trust, providing a tax-advantaged benefit for beneficiaries. It’s important to note that the method of transferring ownership varies depending on the asset type. For example, real estate requires a deed transfer, while brokerage accounts involve completing beneficiary designation forms or re-registering the account in the trust’s name. Approximately 70% of estate plans utilize a combination of both cash and property assets for funding trusts, maximizing flexibility and control.
How does transferring property affect its value for tax purposes?
Transferring property into a trust generally doesn’t trigger immediate tax consequences, *provided* the trust is properly structured. However, understanding the implications for estate and gift taxes is crucial. For example, in California, assets held in a properly structured revocable living trust are considered part of your estate for estate tax purposes, although California does not have a state estate tax. Federal estate tax rules apply, with a high exemption amount (over $13.61 million in 2024). Furthermore, the “step-up in basis” rule is a significant benefit. When property is inherited, the basis (original cost) is “stepped up” to the fair market value at the time of the owner’s death. This can significantly reduce capital gains taxes when the beneficiaries eventually sell the inherited asset. It’s particularly beneficial for appreciating assets like real estate and stocks. In California, because of community property laws, assets acquired during a marriage receive a “double step-up” in basis upon the death of the first spouse, offering even greater tax advantages.
I heard about a client who encountered issues when transferring property; can you share that story?
I recall a situation with a client named Harold. Harold owned a beautiful beach house and a substantial stock portfolio. He attempted to transfer the beach house into a trust using a quitclaim deed he found online, without updating the property tax records or notifying his homeowner’s insurance company. He thought he’d saved himself some legal fees. Unfortunately, this created a title issue, and when he tried to refinance his mortgage, the lender discovered the discrepancy. It became a complicated, costly process to correct the title and appease the lender, and it took months to resolve. He ultimately spent more money fixing the problem than he would have spent if he had engaged an attorney to handle the transfer correctly. This illustrates the importance of proper documentation and compliance with legal requirements when transferring property.
Luckily, another client, Beatrice, had a much smoother experience; how did she do it?
Beatrice, a retired teacher, also wanted to fund a trust with her real estate and investments. She proactively sought legal counsel, and we worked together to prepare the necessary deeds, transfer documents, and beneficiary designation forms. We ensured that all title records, insurance policies, and account registrations were updated to reflect the trust’s ownership. We also coordinated with her financial advisor to seamlessly transfer her investment accounts. The entire process was smooth and efficient, and she gained peace of mind knowing that her assets were properly protected and would be distributed according to her wishes. Her diligence and proactive approach saved her significant time, money, and stress. She even remarked, “Knowing everything is handled correctly is worth every penny.”
At Escondido Probate Law, we specialize in assisting clients with all aspects of trust funding, including property transfers, asset titling, and beneficiary designations. Our experienced team ensures compliance with California law and protects your assets for future generations. We can assist with any and all estate planning needs.
720 N Broadway #107, Escondido, CA 92025Contact Steven F. Bliss ESQ. at (760) 884-4044 to schedule a consultation and learn how we can help you achieve your estate planning goals.
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