Thought Leaders: Back to the Basics: Funding Your Revocable Trust

A revocable trust is one of the most flexible and widely used estate planning tools because it allows individuals to simplify the transfer of assets after death by avoiding the probate process, while maintaining control during life. However, even the most well-written trust agreement will fail to achieve these benefits if the trust is not properly funded. “Funding” refers to the process of formally transferring ownership of assets into the name of the trust. Without proper funding, these benefits may be lost. 

Funding a trust involves a concerted effort between both the attorney and the settlor of the trust. It is important to have a clear discussion with your attorney regarding how involved the attorney will be in the retitling process. Common assets to be transferred into the trust include:

• Real Property. Both your primary residence and any additional property owned in your personal name should be deeded into the name of the trust. Many estate planning attorneys will offer to draft a transfer deed along with the trust agreement. 
• Financial Accounts. Checking accounts, savings accounts, and non-retirement investment accounts should be retitled into the name of the trust. You should contact your financial institutions to assist with retitling. 
• Business Interests. If you are a member of an LLC or corporation, you may want to consult your organization’s governing documents to see whether you are permitted to transfer your interest into the trust. If there are no transfer restrictions, your attorney may offer to draft an “assignment” of your interest.

Retirement accounts, such as 401ks and IRAs, along with life insurance policies, are some of the few assets that most estate planning attorneys advise remain in the individual’s name. Retitling a retirement account can have adverse tax consequences. Instead, these assets are typically disposed of with beneficiary designations, which allow the funds to be passed directly to the named beneficiaries outside of both probate and the trust administration process. 

Keep in mind that funding your trust requires ongoing maintenance and oversight. For example, if you sell your home to upgrade to a larger residence, the newly purchased property should be properly titled in the name of the trust, rather than your individual name. Be sure to regularly review titling on your assets to ensure that funding is airtight so you do not lose the benefits of a revocable trust.

When properly drafted and funded, a revocable trust can be an incredibly effective estate planning tool. An experienced estate planning attorney can help guide you through the funding process and ensure that your loved ones avoid administrative headaches down the line.