Outline on Funding Your Revocable Trust BY MICHAEL J. HOWELL
If you have a revocable trust agreement sometimes called a revocable living trust, it is normally designed to be funded with all of your assets that would normally be probate assets in order to avoid going through probate when you die. A probate asset is an asset that passes by your will or if there is no will, then by intestacy, through the probate court to those named in your will to receive the property or, if by intestacy, then by the law of intestate succession to intestate heirs. Normally a revocable living trust becomes the primary dispositive document for the transfer of your assets after your death.
For your revocable living trust to work properly, you have to change or transfer the title of your assets into the name of your trustee. Normally the person setting up the trust, called the trustee, is also the person who creates the trust. The person who creates the trust is normally referred to as a settlor, grantor and sometimes the trustor. The settlor is often the trustee for himself or herself; although, a bank with trust powers or other individual can be the trustee.
Click on the link above for a copy of an outline that we include in the closing letter to our clients on How to Fund Your Revocable Trust. A copy is also under our Civic Group Seminars section. The outline is in PDF format and can be downloaded and printed, if needed.
The information provides a list of information normally needed by your banker, stock broker, insurance agent, real estate attorney, and other third parties with whom you have assets, in order to transfer the assets into a Revocable Trust. There is also an article concerning trust funding under our Estate Planning section. In addition, there a good summary article titled Transferring Assets Into Your Revocable Living Trust also under the sub-tab titled How To Fund Your Trust.
It should always be kept in mind that there are some assets which are rarely placed into Trust, such as 401(k)s, IRAs, Annuities and other Pension Type Assets. This is mainly because you can inadvertently trigger an income tax on the entire value of the account. You may also lock yourself into a shorter post mortem payout than is desirable. You should never place these assets into Trust without a letter from your CPA or attorney specifically telling you to do so.
Most trust funding can be taken care of by the client who created the Revocable Trust, assuming they did so with the assistance of a qualified attorney. The notable exceptions are real estate, IRAs, 401(k)s, Annuities and other Pension Type Assets. Also keep in mind that if the Trust is not revocable, it should not be funded without the advice and input of the attorney who created the Trust.
In all cases, trust funding should only be after a consultation with and the receipt of a letter or other instructions telling you to proceed from the attorney who drafted the Trust Agreement.