Putting Your Trust to Work

One of the most common reasons clients choose to utilize a Revocable Living Trust is to avoid probate, a time-consuming and expensive court-supervised process that oversees the distribution of assets upon death.  There are two key aspects to ensure that a Revocable Living Trust will in fact avoid probate: (1) designing, drafting, and signing a comprehensive Revocable Living Trust; and (2) re-titling assets to the trust ("trust funding").  While many clients and their attorneys concentrate on the first aspect, the second aspect is often overlooked, causing unnecessary and unintended consequences.   

Once your trust is completed and signed, the next step is to take inventory of all of your assets.  In general, you will want to re-title all of your assets to your trust.  This means instructing your banks to change the title on your checking accounts, savings accounts, money market accounts, certificate of deposit accounts, and safe deposit boxes from your name to the name of your trust.  This involves signing new signature cards and giving the bank some basic information about your trust.  

For taxable investment accounts, again you will need to instruct your brokerage firm to re-title the accounts from your name to the trust.  Brokerage firms will often have their own forms for you to fill out giving the firm basic information about the trust and your powers to control investments as trustee.

Your home and other real property such as rental properties, commercial properties, and vacant lots need to be deeded to your trust via new deeds.  It is very important that the deeds are worded correctly to avoid adverse income and property tax consequences.  In California, additional forms such as a Preliminary Change of Ownership Report must be completed along with the deed.  It is also a good idea to notify your homeowner's insurance company of the fact that you have transferred title to your trust and to request that the insurance company add the trust as an additional insured.

Business entities such as corporations, LLC's, and general partnerships should also be re-titled to the trust by issuing new stock/membership certificates or amending the entity's governing documents.

If you own any timeshares, they should also be re-titled to the trust.  Some timeshares are "deed based," in which case a new deed will need to be executed and recorded.  Other timeshares are "account based," in which case the timeshare company should be contacted with a request to change title from your name to the name of your trust.

Certain assets are purposely not placed into your trust while you are living: retirement plans, life insurance, and annuities.  For these assets, you need to make sure that the designated beneficiary forms are up-to-date and coordinated with your overall estate plan.     

Many attorneys leave all of the work of trust funding up to the client.  Because trust funding is crucial and because it's much more complex and detailed than it might appear, I always insist on doing my clients' funding for them.  It's also one of the first issues that should be examined when reviewing an already existing trust.  You can have the most beautifully drafted trust in the world but if it's not funded, it won't work as expected.