How Do I Put Property, Money, and Other Assets in a Living Trust?

For real estate properties, you can create a property deed and submit a quitclaim deed with the trust details. For financial holdings, you can open trust-designated accounts at the bank and investment firms with transfer authorizations. For investments, you can coordinate with transfer agents and issuers of bonds to provide updates on ownership. You can work with insurance providers to change ownership and/or beneficiaries for insurance and annuities.

This article provides basic instructions on how to put property, money, and other assets in a living trust.

Funding a Revocable Living Trust

Drafting a living trust document is only the first step. For the trust to effectively distribute assets after death, the grantor must transfer assets into the trust. There are many methods that a grantor may use to transfer assets into a trust, including the following:

• Deeds

• Title transfer

• Assignment of ownership

• Opening new accounts

• Assignment of rights

• Incorporating a pour-over will

• Naming the trust as a beneficiary

These are the most common methods used to transfer assets into a trust.

Deeds

You may incur fees and taxes by transferring real estate into a living trust. It depends upon state law requirements.

Some states charge a nominal fee. Other states consider transferring a property into a living trust to be the same as a sale at full market value. In those cases, the transfer creates a significant tax liability. It's wise to consult a tax advisor before transferring real estate to understand the financial consequences and tax planning necessary for the transfer.

Transferring property typically requires the grantor to file a quitclaim deed. A grantor files a quitclaim deed with their county clerk, which transfers the property to the trust. You may need to file a copy of the trust document, a Memorandum of Trust, or a Certificate of Trust with the quitclaim deed.

If the property is part of a homeowners association (HOA), you may need permission from the association. You may need the lender's consent if the property has a mortgage.

Title Transfer or Retitling

A title document proves vehicle ownership. There may be two options for transferring title (depending on the laws of your state):

• You may be able to retitle the vehicle to the living trust, listing the trust as the owner.

• You may designate the trust as a beneficiary of the title after death.

Transferring the vehicle's title could result in substantial taxes and fees. It could raise your insurance premiums. The vehicle title transfer may require a lender's approval if there is a lien on the vehicle. Before you begin the process, you should talk to your insurer, lender, and tax advisor.

Retitling assets to the name of the trust is an effective estate planning tool. You can retitle certain assets and place them in the trust. These include the following types of assets:

• A brokerage account

• Certificates of deposit

• Investment account

• A nonqualified annuity

Stocks and bond certificates can be reissued in the name of the trust, though this is complex. Ask your broker for advice on how to do this.

You can retitle business interests in the name of the trust. These include:

• Business partnership interests

• Shares in a limited liability company (LLC)

• Shares in a corporation

Check the partnership agreement, operating agreement, or articles of incorporation for instructions. These documents will also outline any transfer restrictions.

Assignment of Property Interest

Most property does not come with proof of ownership. In some instances, you can transfer ownership of personal property, such as:

• Collectibles

• Antiques

• Jewelry

You may be able to transfer personal property with an Assignment of Property Interest document. However, there is no standard form.

You must create the form stating precisely what you are transferring to the (named) trustee of the (named) trust. Sign and date the form. You must sign it once as the person assigning the properties to the living trust and once as the trustee. Include the word "trustee" after that signature. You may wish to have the form notarized.

You should also list all this property on a page of the trust document called Schedule A or Exhibit A. Describe the property in sufficient detail so that any successor trustee will be able to identify the property upon the grantor's death.

In addition to personal property, the following assets can also be assigned to a living trust in this matter. These assets include:

• Royalties

• Copyrights

• Patents

• Trademarks

Consider including identification numbers where relevant. Notify the royalty company of the transfer of ownership.

Transfer of Insurance Policies

A grantor can name a living trust as a life insurance policy's owner or beneficiary. However, in some states, the cash value of a life insurance policy is only protected from creditors if a person owns the policy. Transferring the policy's ownership to the trust could cause you to lose that protection. Ask your insurance agent about the consequences of your situation.

Transfer of Bank Accounts

As for bank accounts, the bank may require you to close the account and reopen a new account in the name of the trust. These accounts can include:

• Savings accounts

• Checking accounts

• Money market accounts

• Certificate of deposit (CD) accounts

It may be advisable to wait for any CDs to mature. You can use the cash in the CD to open a new CD in the trust's account.

Assignment of Rights

An Assignment of Rights is a legal document used to make your trust the recipient of your payments from oil, gas, and mineral rights in properties you do not own. If you own the property, it may be easier to change the deed. An Assignment of Rights document can also direct payments for outstanding loans owed to the grantor into the trust fund.

Funding an Irrevocable Trust Through a Pour-Over Will

The most important tool for transferring remaining property into a living trust upon the trustor's death is setting up a pour-over will before death. Any assets that aren't distributed to an heir by title or deed, or transferred into the living trust, "pour over" into the trust.

It's disadvantageous to put some assets into a trust. For example:

• Some car insurance companies will charge higher premiums for trust-owned cars.

• If a car, truck, boat, etc., is involved in an accident and the owner is liable for damages above the insurance policy limit, creditors could attach a judgment to the trust.

• Some financial institutions may not want to finance or refinance a trust-owned property or may not consent to transfer a mortgaged property into a trust.

Some assets may have been unintentionally left out of a will, while other assets may be unknown at the time of death. For example, the deceased may be owed money or be unaware that they inherited property. These assets transfer with a pour-over will.

The downside to this approach is that a will must go through the probate process, which takes time. This leaves that part of the estate vulnerable to estate taxes.

Beneficiary Designation

The following types of assets should list the trust as the primary or secondary named beneficiary of funds. The grantor must complete this step during their lifetime. The accounts payout to the trust after death.

Talk to your tax advisor or estate planning attorney to determine whether a primary or secondary designation is most appropriate. Accounts with beneficiary designations can include the following:

• Retirement accounts (the deceased will no longer be using the money in their IRA, 401(k), 403(b), pension plans, and qualified annuities)

• Health Savings Accounts (HSA) and Medical Savings Accounts (MSA)

• Life insurance policies

• As noted above, a car title can list the trust as a beneficiary

What is a Living Trust?

Note that a living trust is a legal arrangement that helps you manage and distribute your assets without going through the probate process. A living trust can be transferred to beneficiaries on death or at a specified time. It also has several other benefits as well, including the following:

• After death, a trust can reduce or eliminate state and federal estate taxes.

• If the decedent owned real estate in more than one state, it can all be placed into the trust to avoid ancillary probate in multiple states.

• It requires only one document to provide instructions for distributing all types of assets.

• A grantor can choose to have the trust professionally managed for maximum income-earning potential.

• The trustor can specify beneficiaries. They also can specify when and under what conditions they will receive their inheritance.

• Assets held in the trust can sometimes be protected from the beneficiary's creditors, divorcing spouses, and even their own irresponsible spending.

• There is no public record for trust documents, so it provides privacy for heirs. The probate process does not.

The trust funder is called a grantor or settlor. Most living trusts are revocable trusts set up during the trust funder's lifetime. This type of trust does not act as a tax shelter or provide asset protection from creditors. However, the trust funder is usually the trustee and retains control over the assets.

The grantor has control over the trust assets and can take the following actions during the grantor's lifetime:

• Designate beneficiaries

• Change the terms of the trust

• End the trust at any time

You can provide directives for minor children, those with special needs, a surviving spouse, or any other individual or entity.

Once the trust funder dies, the trust becomes irrevocable, and those assets in the trust are no longer taxable. Any income tax would be the responsibility of the trust. You can set up a testamentary trust in your last will and testament.

Interested in Using a Living Trust as Part of Your Estate Plan? Talk to an Attorney

It's best to seek legal advice if you want help setting up a living trust or have questions about other estate planning concerns. A local estate planning attorney can guide you through the entire process. They can help you set up a trust for your loved ones and transfer assets according to your directives.