What Are the Procedures for Funding a Trust?

It's not enough to simply create and sign a trust agreement when you create a revocable living trust. If you stop there, the trust won't function properly and do what you intend it to do.

You must “fund” your assets into the trust after the agreement has been signed. Three general procedures can accomplish this and they depend on the type of property that's being funded. You can change the title or ownership, you can assign ownership rights, or you can simply change the beneficiary.

Change of Title or the Ownership

This works best for assets such as bank accounts, non-IRA, and non-401(k) investment and brokerage accounts, stocks and bonds held in certificate form, and real estate.

These types of assets can be funded into a revocable living trust by changing the owner of the asset from your individual name into the name of the trust. 

The current title might read “William Sample”. The new title would read “William Sample and Jane Sample, Trustees, or their successors in trust, under the William Sample Living Trust, dated January 1, 2018, and any amendments thereto”. 

Assignment of Ownership Rights

Assets such as personal effects that don't have a legal title can be funded into a revocable living trust by assigning ownership rights from your individual name into the name of the trust.

This would be appropriate for assets such as jewelry, artwork, antiques, or monies owed to you due to personal loans that you've made or mortgages that you've taken back. It would also apply to royalties, copyrights, patents, certain types of oil, gas and mineral rights, and partnership interests and membership interests in limited liability companies.

The assignment language might read like this:

"I, William Sample, hereby assign all of my rights, title and interest in and to that certain promissory note dated January 31, 2018, in the principal amount of $40,000 by and between William Sample as the lender and John Smith as the borrower, to William Sample and Jane Sample, Trustees, or their successors in trust, under the William Sample Living Trust, dated January 1, 2018, and any amendments thereto."

The new title would read “William Sample and Jane Sample, Trustees, or their successors in trust, under the William Sample Living Trust, dated January 1, 2018, and any amendments thereto”.

Change of Beneficiary

Assets such as life insurance, retirement accounts including IRAs, 401(k)s, and 403(b)s, certain pension benefits, health savings accounts (HSAs) and medical savings accounts (MSAs) do not actually have to be retitled into the name of your revocable living trust. Instead, the primary or secondary beneficiaries of these types of assets are simply changed to the trust.

If the current beneficiary is “Jane Sample", the new beneficiary would be “William Sample and Jane Sample, Trustees, or their successors in trust, under the William Sample Living Trust, dated January 1, 2018, and any amendments thereto”.

State Laws Can Differ

Laws and requirements can vary from state to state and can change frequently. The above language might not be appropriate in every situation or for your location. Always consult with an estate planning attorney to make sure you're properly making transfers according to your state's laws.