Founder
Creating a revocable living trust is only the first step. To work as intended, the trust must actually own the assets you want it to control. Funding a trust means transferring ownership of eligible assets into the trust’s name. If that step is overlooked, those assets may still need to go through probate, defeating one of the primary reasons for creating the trust.
What Does It Mean to Fund a Revocable Living Trust?
Funding a revocable living trust means changing ownership of certain assets from your individual name to the name of your trust. Once transferred, the trustee manages those assets according to the terms of the trust.
Many people sign their trust documents but never complete the funding process. An unfunded or partially funded trust often leaves family members dealing with probate for assets that were supposed to be handled through the trust.
Although every estate plan is different, most funding involves updating ownership records, account registrations, or beneficiary designations.
Which Assets Should Be Transferred Into a Revocable Living Trust?
Many assets can be transferred into a revocable living trust, including:
- Real estate, including your home, vacation property, and rental property
- Checking, savings, and money market accounts
- Investment and brokerage accounts
- Business interests, depending on the governing documents
- Certain valuable personal property
Some assets are generally handled differently. Retirement accounts, such as IRAs and 401(k)s, are typically not retitled because doing so may create tax consequences. Instead, beneficiary designations are often used as part of the overall estate plan.
How Do You Transfer Real Estate Into a Trust?
Real estate is often one of the most valuable assets in an estate.
In Massachusetts, transferring real estate generally involves preparing and recording a new deed that transfers ownership from you as an individual to you as trustee of your revocable living trust. The deed must comply with Massachusetts recording requirements and be filed with the appropriate Registry of Deeds.
Simply naming the property in your trust documents does not transfer ownership. The deed must be properly prepared and recorded.
How Do You Transfer Bank Accounts?
Most banks have established procedures for transferring accounts into a trust. In most cases, you will provide trust documentation, complete the institution’s required forms, and update the account registration so the trust becomes the owner.
Each financial institution has its own requirements, so the process may vary slightly.
How Are Investment and Brokerage Accounts Transferred?
Investment and brokerage accounts are generally transferred by updating the account registration with the financial institution. The firm may request trust documentation and transfer forms before changing ownership from your individual name to the trust. If you own stocks or bonds directly rather than through a brokerage account, additional transfer requirements may apply.
What Happens If You Forget to Fund Your Trust?
An unfunded trust can create unnecessary complications for your loved ones.
Assets that remain in your individual name may still have to pass through probate, even if you have a valid trust agreement. This can lead to:
- Delays in administering your estate
- Additional court proceedings
- Increased legal and administrative costs
- Confusion over which assets belong in the trust
- A distribution process that differs from what you intended
Partial funding can also create problems by leaving some assets inside the trust while others remain outside it.
Many estate plans also include a pour-over will, which directs remaining assets into the trust after death. While this can help carry out your wishes, it generally does not avoid probate for assets that were never transferred during your lifetime.
When Should You Review Trust Funding?
Funding should be reviewed whenever your financial situation changes. Purchasing or selling real estate, opening new financial accounts, acquiring business interests, receiving a significant inheritance, moving to Massachusetts, or updating your estate plan are all good times to confirm your trust remains properly funded.
Make Sure Your Trust Works When It Matters Most
A revocable living trust can only accomplish its intended purpose if it is properly funded. Transferring your real estate, financial accounts, and other eligible assets into the trust helps your estate plan function as intended and may reduce unnecessary probate for your loved ones.
At The Law Offices of Patricia Bloom-McDonald, we help clients throughout Massachusetts create comprehensive estate plans and properly fund their revocable living trusts. If you have questions about transferring assets into your trust or would like to review your existing estate plan, contact us to schedule a consultation.