When navigating a particularly uncertain economy, where market fluctuations, inflation concerns and interest rate changes can affect the value of assets, properly funding a trust arguably becomes more important than ever.
If you’re getting ready to create a new trust or you need to take significant steps to fund an existing trust, whether your goal is to protect wealth, minimize taxes or provide for your loved ones, being thoughtful about your approach is going to be important.
Making a plan
Funding a trust means transferring ownership of assets into a trust so that they are managed and distributed according to the wishes of the trust’s creator. This process is consequential, as creating a trust without properly funding it is like building a safe and forgetting to put your valuables inside. During periods of heightened economic uncertainty, thoughtful funding strategies can help preserve the value of your assets, avoid probate and provide flexibility for future financial challenges.
You’ll want to start by reviewing all major asset categories. This includes real estate, bank accounts, investment portfolios, business interests and valuable personal property. Real estate can be retitled in the name of the trust through a deed transfer. Bank and brokerage accounts may require you to complete specific forms with your financial institutions. Assets like stocks and bonds can be re-registered to reflect trust ownership.
It’s also important to coordinate beneficiary designations. For assets like retirement accounts and life insurance policies, you may not retitle them into a trust, but you can name the trust as a primary or contingent beneficiary to ensure those funds are distributed in line with your estate plan.
In times of economic volatility, diversification is often key to success. Funding your trust with a mix of assets—such as cash, market-based investments and stable income-generating property—can help mitigate risk. Trusts can also be designed to include provisions for discretionary distributions, giving your trustee the flexibility to adjust to changing market conditions and family needs.
Regularly reviewing and updating your trust-funding strategy can help to ensure that your estate plan remains aligned with your financial situation and goals. In any economy—but especially an unpredictable one—funding your trust thoughtfully and effectively grants you peace of mind and better ensures that your legacy is preserved and protected for those you care about most.