As noted in other free educational resources available through Estate Planning Ministry, a Trust is a legal instrument that directs how property (held within the Trust) will be distributed and maintained.  While a Will merely describes the property of the decedent and indicate that such property will be distributed, in the case of a Trust, your property must be transferred to the Trust before it will be subject to the provisions of that Trust.  Under a Revocable Living Trust, the creator and funder (called a “grantor”) is also commonly both the trustee and beneficiary of the Trust during his or her lifetime.  This is the case in the form you generated through EPM’s ADAM Platform.  This means that if you transfer your assets into a Revocable Living Trust, you will retain the same amount of control over those assets during your lifetime that you had prior to the transfer.  So long as you remain alive and competent, you will also have the ability to revoke or amend the Trust.

Drafting and Executing a Trust Agreement or Declaration of Trust is not Sufficient

Drafting or creating a Trust Agreement or Declaration of Trust by itself is not enough.  A Trust must be “funded” in order to gain any benefit from its creation.  The manner by which it is funded is dependent on the type of property.  The timing on the funding is also an important consideration.  Once your Trust is drafted there are three immediate questions.  First, what property do you want to transfer to the Trust?  Second, how do you go about transferring your property to the Trust? Third, how much of this process can you accomplish on your own?  The answer to the third question depends on the type of property you are trying to transfer, your comfort level in dealing personally with financial institutions and forms, and the amount of time you are willing to personally allocate to Trust funding.  Most personal property items can be transferred to the Trust by listing those items in the appropriate schedule as part of the Trust.  This is explained further below.

What does it mean to “Fund” a Trust

Funding a Trust is the process of transferring your assets to your Trust.  This includes setting up or transferring one or more bank accounts under the Trust, depositing funds into the Trust’s bank account, and transferring retirement accounts, stocks and mutual funds, bonds, life insurance, business interests, remaining personal property, and/or transferring title (via deed) to your real estate from your name to the Trust.  Each type of property has its own mechanism for transfer.

Funding a Trust is Absolutely Essential

Trusts are not legally effective until they have been funded with at least some of the grantor’s property (the grantor being the person creating and funding the Trust).  This means that you cannot rely on a “small estate affidavit” and a Pour-over Will to sweep all of the grantor’s property into the Trust upon the grantor’s death.  If your Trust is drafted, but does not legally own title to any property at your death, your estate will be likely treated as if no Trust was in place.

Timing – Funding the Trust at the creation of the Trust, later in life, or upon death

A Trust may be funded while the grantor is alive, or after the grantor is dead.  It is generally best to fund the Trust at the time the Trust is created.  Any assets excluded from the Trust are typically transferred to the Trust through the use of a pour-over will.  However, the larger the value of the assets outside of the Trust, the greater the value of the assets that will need to go through probate.  Even a pour-over will must generally still go through probate, but when the value of the estate assets outside of Trust are below a certain amount set by law in each state, there are often expedited or summary probate proceeding options to greatly reduce the process.  Once assets are transferred under a Trust, the Trustee will need to sign as the Trustee of the Trust, rather than signing personally. The form you have generated through ADAM includes one or more Schedules (i.e. Schedule A), in which the property being transferred to your Trust should be identified.  These schedules may be amended from time to time, and this process is simple in relation to a revocable living Trust.  Note further that simply listing property in a schedule may not be legally sufficient, depending upon the property (for example, real estate is almost universally transferred via Deed or form of ownership (such as in the case of joint tenancy)).

Mechanism of Transfer

The process of transferring one category of assets (e.g. personal property) is often different from the process of transferring another type of assets (e.g. real estate).  Here are the general steps necessary to transfer particular types of assets to your revocable living Trust:

  • Real Estate.  Real estate is transferred through the execution of the appropriate deed transferring the real estate property to the Trust. You or your attorney must then record the deed with the Recorder of Deeds for your county.  Unless your bank or professional Trustee (if you use a professional Trustee) offer this service, the deed drafting and recording process should be handled through your attorney.
  • Vehicles.  When there is a formal title to a given personal asset, such as with a vehicle, transfer is accomplished by signing over the title to the Trust.  Remember vehicles with a title include automobiles, motorcycles, recreational vehicles, boats, trailers, snowmobiles, and most other motorized or recreational vehicles for which there is a formal title.  See the additional note below concerning why many people elect to keep certain vehicles outside of the Trust.
  • Other Tangible Personal Property. It may also be advisable to transfer all of your personal property (e.g. jewelry, art, furniture, heirlooms, clothing, and other personal property) to the Trust.  This property can be listed in the appropriate schedule (e.g. commonly identified as Schedule A, Schedule B, or another Schedule) you are including as part of your Trust.
  • Bank Accounts.  Depending on the amount of personal property you possess, it may be advisable to transfer your savings accounts, and possibly your checking accounts, to your Trust.  This can be accomplished by delivering a letter of instruction to the bank retitling such accounts so that they are held by the Trust.  Your bank may have another process for transferring these accounts and the bank will generally walk you through this process without any charge.
  • Life Insurance, Retirement Accounts, Mutual Funds, Stocks, and Bonds.  If you want to consider including retirement accounts, pensions, stock, bonds, and life insurance policies as part of your Trust, consult with a tax professional before the transfer.  Your insurance provider will be able to provide you with “change of beneficiary” forms.  Married individuals generally elect to name their spouse as the primary beneficiary of both their life insurance and retirement account, and designate their Trust as the successor beneficiary.  Including these accounts in your living Trust could trigger adverse tax consequences.  The institution that manages your retirement account(s) can provide you with forms to change the beneficiary designation for your account.  Your brokerage firm should be able to provide you with a stock assignment or other like form to transfer your mutual funds and/or stocks.  Government issued savings bonds can be transferred to your account by filling out form PD F 1851 E, which can be obtained from
  • Business Interests.  If you own equity in a non-public company (such as stock in a closely held company, a partnership interest, or a membership interest in a limited liability company), this equity can often be transferred to the Trust.   However, there may be (and often are) certain legal restrictions against the transfer of an owner’s equity interests in a private company, and you need to seek professional guidance on these legal questions.  Every business and situation is different and this process should not be attempted without the assistance of a qualified attorney.

Common Assets Held Outside of Trust and the Impact

There is a balance between transferring all of a grantor’s assets into a Trust versus continuing to hold certain assets outside of Trust.  Certain assets are often not placed into the Trust.  One example is the grantor’s personal vehicle as it may be difficult, or more expensive, to obtain insurance for a vehicle owned by a Trust.  Additionally, certain assets such as an IRA, may lose tax benefits if they are transferred under a Trust.  Grantors may also refrain from including assets in the Trust that are otherwise transferred by other mechanisms that are outside of probate (such as a real property held in joint tenancy with a spouse, stock subject to a Buy-Sell Agreement, pay on death bank accounts, and insurance policies and retirement benefits with a specified beneficiary as the recipient).  Further, it may be problematic if a grantor does not hold any cash outside of sufficient cash reserves outside of Trust.  At death, certain costs will be incurred and a lack of directly accessible funds available for these costs poses a real issue (for those reasons people often set up a separate bank account outside of the Trust with funds designated for such funeral costs). As a final note, there are some additional benefit from probate in that probate puts creditors on notice of the death, which begins the clock on the applicable statute of limitations (limiting the timeframe in which creditors can seek to enforce their rights).  It is important to consider which of your assets you want passed under Trust, under a will (through probate), or passed outside of both the Trust and probate (via other legal mechanisms).

Additional Resources to Consider

There are a number of additional free or low-cost resources also available to you as you work to transfer certain assets to your Trust.  Many banks and even credit unions have a “Trusts department” that provides free or low-cost services that help a customer transfer his or her assets with that institution from the individual’s name to the name of the Trust. Insurance companies, employers, and benefits plan administrators often have simple forms and free assistance for individuals that wish to assign certain beneficiary rights or policy ownership information from an individual to a Trust.

Special Considerations in Relation to Certain Assets

Every person has their own level of comfort and ability to deal with financial institutions, benefit plan administrators, and other similar groups holding the person’s assets.  Those developing their own estate plan should carefully consider the cost/benefit and risks of each aspect of their estate planning.  While some of these matters may be handled personally in order to save on the cost of professional fees (such as reducing attorneys’ fees), this is not always a good decision, as the consequences of certain errors can at times negate, or even exceed any benefit from the estate plan.  Even the most sophisticated individuals should seek the advice of a qualified attorney when addressing the transfer of business assets, real estate, and quit claim bills of sale transfers.