A trust must be funded in order to be effective. Funding a trust simply means transferring ownership of assets to the name of the trust.
Assets owned by “Thomas Jefferson” become assets owned by “Thomas Jefferson, as Trustee of the Thomas Jefferson Revocable Living Trust, dated July 4, 1776,” or “[Trustee Name(s)], as Trustee(s) of the [Trust Name].” When you create your trust with Just In Case Estates, we’ll provide the exact name that you should use when re-titling your assets.
Depending on the type of asset, the process by which you transfer ownership to the trust may differ. In many cases, you’ll work with third parties who may ask that you share a certificate of trust or abstract as proof of the trust’s existence. In this guide, we review all the following common property types:
- Real estate
- Titled personal property (cars, boats, motorcycles, etc.)
- Untitled tangible personal property (household belongings, jewelry, artwork, etc.)
- Bank accounts
- Brokerage accounts
- Private business ownerships
- Life insurance, retirement accounts, health savings accounts, medical savings accounts
Transferring real estate to a trust requires a transfer deed, typically a quitclaim deed. A quitclaim deed is a deed of release that is used when a real estate property transfers ownership without being sold or is sold to a related party. It’s a relatively simple document that you can generally prepare without the help of a lawyer by following these steps:
- Retrieve your original deed
- Draft the transfer deed using a form that complies with your county and state
- Complete the necessary signing ceremony for real estate transactions in your state, which usually involves signing with a notary and/or two witnesses
- Record the deed with the county clerk
- Obtain the new original deed
For a more detailed walkthrough of real estate transfers and list of online companies specializing in quitclaim deeds, see our in-depth guide to quit claim deeds.
Titled personal property
Transferring personal property with a title (cars, boats, motorcycles, etc.) requires obtaining a new title in the name of the trust.
Be aware that in some cases and jurisdictions, this transfer may be considered a sale potentially resulting in unwanted taxes or fees. Additionally, if the personal property is subject to a lien, such as a car loan, you may need to obtain the approval of the lender prior to completing the transfer.
As an alternative to funding your trust today by transferring the title in the personal property, you may be able to place a transfer-on-death (ToD) designation on the title with your trust as the beneficiary. If available, you can find this form at your local DMV.
Untitled personal property
Personal property without a title such as household belongings, jewelry, artwork, or family heirlooms can be transferred by completing an assignment of ownership document. You can use broad categories like “furniture”, “tools”, or “silverware” to easily assign groups of items, but you should name particularly valuable items individually.
Your bank can tell you how savings, checking and money market accounts can be titled in your trust. In some cases, you’ll need to close your current account and open a new account in the name of the trust. Some banks and credit unions may not allow you to title checking, savings, and money market accounts in the name of your trust, in which case you may be able to place a payable-on-death designation on the account with your trust as the beneficiary.
Your broker can advise how to retitle your brokerage account. Similar to bank accounts, generally you will either (a) retitle the account under the trust’s name by completing a change of account registration form or (b) open a new account in the name of the trust and transfer all assets from your old account to the trust’s new account.
DO NOT retitle any brokerage accounts that are retirement accounts such as a 401k or IRA. Doing so may be considered an early withdrawal and subject your account to stiff penalties. Instead, follow the instructions for life insurance and retirement accounts below.
Private business ownership interests
Most ownership interests in private businesses such as partnerships, limited liability companies, and corporations can be retitled in the name of a trust or assigned to a trust. A limited liability company membership interest can be funded into your trust by amending the operating agreement to substitute the trust for you as the member. For a corporation, the shares held in your name will need to be voided with new shares issued in the name of the trust.
Check the partnership agreement, operating agreement, or articles of incorporation of the business to identify any transfer restrictions or procedures specific to your case.
Life insurance, retirement accounts, health savings accounts, and medical savings accounts
Rather than transferring a current title, for these accounts you will name the trust as the beneficiary under the policy or account. Upon your passing, your co-trustee or successor trustee will provide a copy of the death certificate to the company maintaining the policy or account so that it can release the payout to your trust.
The bottom line
The process to fund your trust varies depending on the type of asset. While the funding process is not very difficult and you can do it yourself in most cases, it does take some time and may result in additional costs. Make a list of the assets with which you intend to fund your trust, and work your way down the list starting with the most valuable asset.
If you forget to transfer an asset, it can still become part of your trust plan later as long as your pair your revocable living trust document with a pourover will. Your pourover will acts as a safety net that catches some or all other assets and passes them into your trust. These forgotten or non-retitled assets will probably have to go through probate first, but they can then be distributed according to the instructions in your trust.