Aligning Your Assets With Your Trust

For many, a comprehensive estate plan begins with a living trust agreement. Working with an attorney to create a trust is an important step. But just getting the document drafted and signed is not enough. For any trust to be effective, you must complete the process of aligning your assets with your trust, often called trust funding, as soon as you can. But what exactly is funding?

A common way to think about funding is to imagine your trust as an empty bucket. For that trust bucket to be useful, it needs to be filled with your money and assets. Trust funding is the process of moving your money and assets into the bucket. There are two ways to move money and property into a trust: (1) by transferring ownership of your accounts and property from you as an individual to yourself as the trustee of your trust and (2) by completing beneficiary designations, naming the trust as the beneficiary, on other types of property such as life insurance and retirement accounts.

When you own property in the name of your trust, if you become incapacitated and unable to make your own decisions or manage your affairs or when you die, that bucket can be quickly and easily handed to a successor trustee who has the right and responsibility to use the accounts and property for you and your trust’s beneficiaries. With a trust, no probate court proceeding will be required for the transition of responsibility to a successor trustee for oversight of the trust’s management. But only a fully funded trust will allow your loved ones to avoid probate.

There are several different ways to ensure that your trust owns your accounts and property. Below are some of the most important and common types of property that you should transfer into your trust and how to accomplish it.

Checking and Savings (Cash) Accounts
You should routinely fund checking, savings, money market, and certificate of deposit (CD) accounts of substantial value into your trust. You can achieve this by working with the bank or credit union where you have the accounts and providing them with a Certificate of Trust that lists important information the financial institution will need to complete the retitling of those accounts. 

Before retitling CDs into your trust, you should first check to make sure that no early withdrawal penalties will apply. If a penalty will apply, you may need to wait until those CDs mature and then make the transfer. In most cases, it is not necessary or even desirable to have the bank issue new checks with the trust’s name on them.

Real Estate and Real Property Interests
For your personal residence or other real estate, as well as associated real property interests such as mineral or timber rights, you will need to enlist the help of an attorney to properly identify the interests and prepare, sign, and record real property deeds that transfer those interests into your trust. It is crucial to work with an experienced attorney on this important aspect of funding your trust so that you fully understand any property tax or other legal implications that may result from such a transfer.

Investment Accounts
As with your cash accounts, you should work with your financial advisor or brokerage account custodian to complete the necessary paperwork to retitle investment accounts in the name of your trust. A Certificate of Trust will normally be necessary and will provide the information that is typically needed.

Personal Effects
You can transfer your personal effects such as furniture, jewelry, clothing, books, photos and journals, artwork, coin and stamp collections, and tools into your trust by signing an assignment of personal property prepared by your attorney. You can also transfer vehicles registered with your state’s department of motor vehicles into your trust, but consult first with your attorney about various considerations involved. 

Retirement Plans
Ownership of retirement assets such as individual retirement accounts (IRAs) and 401k plans should remain in your personal name for tax-planning purposes. You should, though, consider who you designate as beneficiary after your death. You may ultimately name one or more individuals, your living trust, or a separate trust created for your retirement assets as beneficiary. Tax consequences must be considered, as well as the ability to protect the proceeds of the plan from the risks associated with potential lawsuits, divorces, bankruptcies, or other creditors of the beneficiaries. Coordinating the beneficiary designations on your retirement plans to complement your trust and estate planning is extremely important, and you should thoroughly discuss any changes with your attorney prior to making them.

Life Insurance and Annuities
Generally, life insurance and annuity investments should name your trust as the primary beneficiary so that the trust can control and protect the proceeds of those policies. Your spouse, partner, or family members may be considered as contingent beneficiaries. Consult with your attorney to determine your best options. The forms necessary to complete the desired beneficiary designation may be obtained from your insurance agent or perhaps online. Keep confirmations of the beneficiary designation with your other trust documents.

Other Assets to Fund into Your Trust
You may wish to align other assets with your trust. This is particularly true if your goal is to avoid probate and ensure that the trust can protect and manage your property in the case of your incapacity or after the property passes to your spouse, children, or other beneficiaries at your death. The following are additional types of property that you will likely need to transfer into your trust:

  • loans, promissory notes, or other receivables
  • business interests such as partnerships, LLCs, sole proprietorships, or small business stock
  • royalties from books and art such as music and recorded performances
  • trademarks and copyrights
  • digital assets, including email accounts, social media channels, online accounts, blogs, and cloud storage of books, photographs, and music
  • college savings plans (529 plans)
  • health savings accounts

Each of these types of property has special characteristics you should consider when transferring ownership to a trust. We can help you with the many issues associated with transferring property into your trust so that you can feel confident that when it comes time for a successor trustee to take over your trust’s management, everything is taken care of. Call us today if you have not yet established a trust or if you have questions about how to properly coordinate ownership of your property with your trust.