Funding a Living Trust
The next step to set up a living trust is to take a complete inventory of all assets you want to be included in the living trust. Make a list of everything no matter how seemingly minimal it may be. Assign a dollar value to each item on the list. This part will not only be important to the beneficiaries but also to the IRS later. Planning the funding will help minimize estate taxes when assets are distributed so there is no need to liquidate assets to pay taxes.
At the top of the list should be the liquid assets such as cash, bank accounts, and precious metals. Next comes items which can be dispersed or sold quickly such as stocks, mutual funds, bonds, automobiles and jewelry. Antiques, art and collectibles can also go here. Then list all tangible property such as deeds, copyrights, business holdings, partnership interests or rights of ownership. Create a full description of each item placed on the list.
The last step to set up the trust is to calculate the amount of taxes the estate may need and plan this into the funding of the living trust. This is done by adding up all of the assets listed above. Then, add up all liabilities such as mortgages, credit cards, bank loans and other personal loans payable by the grantor. Subtract the liabilities from the assets to create the net worth. Calculate at least 20 percent for estate taxes and set this money aside in an interest-baring account in the name of the trust. This guarantees that the beneficiaries won't need to pay probate or taxes when it comes time to disperse the trust.
References: Robert G. Allen; Living Trust Pro