The Final Step in Creating Your Estate Plan: Funding Your Revocable Living Trust

Once we have finalized your revocable living trust, it is then time to “fund” your trust. Funding your trust refers to the process of transferring your assets into the trust – that is changing the legal title to all of your assets in order to conclusively demonstrate that the assets are held in trust. To transfer your assets into your living trust, we will prepare deeds for real property, and/or provide you with detailed instructions for the transfer of other assets such as bank accounts. Although, we describe a few ways of accomplishing many common transfers below, this article is not intended to provide a comprehensive explanation of everything one needs to know about transferring property into a trust and it is not intended to encourage you to perform complex legal transactions without further consultation, particularly if you have limited business experience. The experience estate planning attorneys at the Law Offices of Jon G. Brooks are always available to perform these transfers for you, so always ask us before you attempt to do so yourself.

Funding a California Revocable Living Trust

Assuming that you are the settlor(s) trustee(s), you must transfer title to yourselves as trustees of your trust in order to subject those assets to the terms of your trust. Similarly, in order to ensure that your trust will effectively help you avoid probate at death or avoid a conservatorship while you are alive, all assets you acquire in the future must be transferred into the trust. If you take title to property in your own name at any time without reference to the trust, that asset will not be a trust asset.

Transferring Real Estate into Your Trust

For example, suppose that we have just created for Alex and Elena Smith a comprehensive estate plan, including the “Alex and Elena Smith Revocable Living Trust, dated June 1, 2007”, and our clients, Alex and Elena have executed their trust. Among their assets, Alex and Elena own one parcel of real estate, their home on 123 Elm Street in San Jose. Our final step is to prepare a new grant deed for Alex and Elena whereby they transfer title to themselves, “Alex and Elena Smith, Trustees of the Alex and Elena Smith Revocable Living Trust, dated June 1, 2007.”

When transferring insured property (houses, cars, mobile homes, etc.) to the trust, you should notify your insurance agent of the transfer and ask whether any change in the policy is required. In some cases, it may be desirable for the policy to indicate that the trust is an additional insured. Likewise it is generally a good idea to notify your mortgage lender(s) of your transfer of real estate into your trust in order to ensure that they will not invoke any “due on transfer” clause in your promissory note and deed of trust.

Power of Attorney & California Living Trust Docs

Once you have executed and notarized your new deed(s), we will have them recorded in the office of the country recorder in the county where your property is located. At the same time, our estate planning attorneys will also prepare a Preliminary Change of Ownership Report (PCOR) for you to sign and file with the county assessor’s office in order to ensure that the county does not reassess your property for property tax purposes. The transfer of real estate into a grantor trust in California is not a trigger for reassessment; however, the homeowner should claim the appropriate exemption from reassessment by filing a PCOR when recording the trust transfer deed.

Transferring Financial Accounts into Your Trust

These accounts are normally transferred by changing the name of the account owner on the signature card or other “contract” between you and the bank, broker, etc., to the trustee of the trust (in our example, “Alex and Elena Smith, Trustees of the Alex and Elena Smith Revocable Living Trust, dated June 1, 2007”). Banks are accustomed to making these transfers and you can normally accomplish them by visiting the institution and presenting a copy of a Certification of Trust, which is one of the documents we always include in your estate plan.

Transferring Stocks and Bonds (Not Held in an IRA or 401(k)) into Your Trust

The transfer of your securities to the trust must be accomplished by changing title on the certificates themselves. Most issuers of securities (corporations, local government agencies, etc.) pay a bank or some other company to perform the task of keeping track of who its shareholders are. The bank is typically known as the “Transfer Agent.” We will provide you with instructions on what to tell the issuer or transfer agent of your securities. If you hold your shares through a brokerage firm, you need change the title only on the brokerage accounts, rather than on each share certificate.

Transferring Private Corporation Shares and Other Small Business Interests into Your Trust

Transfers of interests in businesses always require an attorney’s assistance. All businesses require a variety of permits and licenses, and it is necessary that they be reviewed in detail before making the transfer. Further, interests in small businesses such as “s” corporations, LLC and partnership interests, may have transfer restrictions imposed by contract or by applicable law. If you own an interest in a small business, it is critical that you inform us of this asset so that our business attorneys may advise you concerning such a transfer.

Automobiles

It may not always be necessary to transfer every asset, such as a car, into your trust. It is, however, critical that if you do desire not to transfer every such asset, that the aggregate value of all assets you hold outside of trust not be over the threshold value requiring a probate in California. Unless such assets can be passed at death without a probate (by holding such title in joint tenancy or as community property with right of survivorship for example), they should be held in your trust. We will help you determine whether the aggregate of all items of personal property or other type asset which you prefer not to hold in trust will trigger a probate.