Funding Instructions For a Revocable Living Trust

These are some general instructions to help initially guide you in funding your Living Trust.

To fund a trust with most assets, you will make ownership changes to change the title from your name as an individual to your name as a Trustee of your Revocable Living Trust.

For other assets, such as life insurance and retirement accounts, you will make beneficiary changes to properly distribute those assets upon your death.  The beneficiary will not necessarily be your Revocable Living Trust.

Generally, to transfer assets to your trust, you must execute new documents of title, deeds to real property, signature cards for your bank accounts, and change of beneficiary forms for pension plans, individual retirement plans, and life insurance.

Your financial advisor, accountant, broker, or life insurance agent may need to help you make ownership or beneficiary changes.

These instructions will give you general knowledge of how to fund your trust, but they cannot comprehensively address every type of transfer.

Please contact your estate planning attorney to make transfers not addressed in these instructions and to review all transfers.

It is recommended that you place copies of all written documents that evidence the interest of your Living Trust into your estate planning documents.

Using a Certificate Of Trust to Fund A Trust

Your estate plan should include a “Certificate of Trust” or “Affidavit of Trust”.

Your certificate of trust should include the three following items:

1. Statement that your trust exists;
2. Statement that you are a Trustee; and
3. Statement that you have the authority and power to transact business as a Trustee.

Most institutions have their own certification forms for you to fill out.

If the institution you are dealing with does not have a form, provide them with a copy of your Certification of Trust form.

Your Certification of Trust provides only the information that the persons you deal with the need to see without disclosing confidential details.

Your Tax Identification Number

As long as you are acting as Trustee of your Revocable Living Trust, you need not obtain a separate tax identification number for your trust or to file a separate trust tax return.

The Internal Revenue Service (IRS) prefers that you use your own Social Security number.

Report all of the income generated by trust assets on your personal IRS Form 1040 and California Form 540.

When you die, your trust becomes irrevocable for tax purposes.

It may split into multiple trusts, each of which may be treated as a separate taxable entity for income tax purposes.

Your estate planning attorney will work with your successor Trustee and your accountant to distribute your assets pursuant to your trust upon your death.

Titling Assets in Your Name as Trustee

Generally speaking, you should title all of your owned and newly acquired assets in the name of your trust.

We prefer the following format for titling assets in the name of your trust:

[NAME OF TRUSTEE], Trustee of the [NAME OF TRUST] Living Trust dated [DATE TRUST WAS SIGNED] and any amendments thereto.

How to Fund a Trust with Investment Accounts

If you hold publicly traded stocks and bonds already in brokerage or investment accounts, contact your brokers or custodians and direct them to change the title of the accounts to the name of your trust.

The procedure is the same as the procedure for re-titling cash accounts explained above.

You may have to complete new account applications and present a copy of your Affidavit or Certification of Trust to change the title.  Title to the accounts should be in the trust name.

After changing title, your next account statement will confirm the retitling by listing you as Trustee of your trust.

How to Fund a Living Trust with Stocks and Bonds Not Held in Investment Accounts

If you possess original stock or bond certificates, there are two ways to transfer the certificates to your trust.

First, you can open a brokerage or investment account in the name of your Trust and deposit your original certificates in the account.

You may later have your broker deliver the certificates to you made out in the name of the trust if you wish.

Your future account statements titled in the name of your Revocable Living Trust will prove your ownership of the transferred stock or bonds.

Secondly, you can work directly with the transfer agent for the stock or bond and direct the agent to reissue your stock with your Revocable Living Trust named as the new owner.

Funding your Trust with Stock Options

Transferring or assigning stock options requires a careful analysis of the tax and legal issues.

We recommend you ask your Certified Public Accountant (CPA) and your stock plan administrator about your choices in assigning your interests to your Revocable Living Trust.

Funding a Trust with Personal Effects

Tangible personal property calls such items household furnishings, appliances and fixtures, works of art, motor vehicles, pictures, collectibles, personal wearing apparel and jewelry, books, sporting goods, and hobby paraphernalia.

At Opelon, our trusts use a general assignment form attached to the trust along with a personal property memorandum.

Your personal vehicles can be titled in the name of your Revocable Living Trust, but we find that most of our clients prefer to leave their vehicles outside their trust for several reasons.

One, if they have a vehicle accident, the fact they have a Revocable Living Trust could cause the other parties to the accident to assume they have deep pockets and encourage a lawsuit.

Second, heirs can usually transfer vehicles without formal probate proceedings.

If you decide to title your vehicle in the name of your trust, consult your casualty insurance agent to make certain the transfer will not result in a business rating on your insurance policy that would increase your premiums.

Funding your Living Trust with Retirement Plans

Making the proper beneficiary designations for retirement plans involves many complex tax and individual family issues.  Therefore, recommendations should only be made after further consultation with an attorney.

With that said, you should never transfer the ownership of a qualified retirement or pension plan or individual retirement account to your Revocable Living Trust.

Instead, if you have pre-retirement death benefits under such a plan, generally, we recommend you choose from among your spouse, children, or partner as primary and contingent beneficiaries.

You have many trade-offs to consider in naming your beneficiaries–trade-offs that affect your required minimum distributions and the taxation of your benefits after your death.

Please feel free to reach out to us to discuss the issues and solutions for designating your retirement plan beneficiaries to best match your unique goals.

Funding your Trust with Qualified Tuition Plans (529 Plans)

Transferring a 529 plan to your Revocable Living Trust often makes sense, but your trust must contain specific language enabling the Trustee to manage the account.

We recommend that you contact an estate planning attorney before naming your trust as an owner of a 529 plan.

How to Fund a Trust with Life Insurance Policies and Annuities

You may want to tax-proof your major life insurance policies by creating one or more irrevocable life insurance trusts.  You may want the proceeds from your insurance policies paid directly to your Revocable Living Trust.

By consulting with an attorney, you determine the proper ownership and beneficiary designation for each policy.

If you decide to name your Revocable Living Trust as the beneficiary of a policy, here are several points you should consider.

Your policy beneficiary designation, not your Will and Revocable Living Trust, controls the disposition of the policy benefits.

If you have minor children, consider designating your Revocable Living Trust as the beneficiary of your life insurance policies so the policy proceeds will be governed by the Revocable Living Trust.

To do so, we recommend you advise your insurance agent you want your Living Trust as the beneficiary.

Your agent will make the change for you or provide you with the beneficiary designation form for you to complete.

If you name your Revocable Living Trust as the primary beneficiary, name your spouse, partner, or children as the secondary beneficiary.

Each insurance company will have its own preferred format for designating your Revocable Living Trust as the beneficiary.  Here is a typical format:

• Primary Beneficiary:  The [Grantors Name] Living Trust dated [Trust Signing Date]
• Secondary Beneficiary:  Spouse, partner, children, or other heirs.

Be sure to obtain a letter from your insurance company confirming the change of beneficiaries in your insurance policy or annuity records. Keep this letter with your estate planning documents.

Fund a Trust with Mortgage, Notes, and Other Receivables

If you have loaned money to anyone, you should assign your interest as lender to your Revocable Living Trust by a written document and notify your debtor of the assignment.

Work with an attorney to prepare assignment documents for each interest for your signature.

Funding your Trust with Partnership Interest

If there are no restrictions in your general partnership agreement, your interest in the general partnership should be transferred through a written assignment of interest signed by you and acknowledged by your partners.

Transfer of an interest in a limited partnership is accomplished in the same way as transferring a general partnership interest.

Work with an attorney to prepare partnership assignment documents for your signature.

Fund a Trust with Corporate Business or Professional Interests

If your business is a corporation, you must cancel shares held in your name and reissue them in your name as the Trustee of your Revocable Living Trust.

If your business is a limited liability company, have your attorney draft assignment documents to assign your interest to your Revocable Living Trust.

If applicable, contact your corporate attorney to assist you in transferring your professional business interests (medical Corporation, Dental Corporation, etc.) to the Revocable Living Trust.

Funding your Trust with Sole Proprietorship Business Interests

A sole proprietorship is a business entity owned by one person and not registered with the secretary of state.

Ownership of a sole proprietorship can be transferred to a Revocable Living Trust with a written assignment of interest.

All items of tangible personal property should be listed individually or by category in the assignment.

Fund a Trust with Oil, Gas, and Mineral Interests

The method of transferring interests in oil, minerals, and gas depends on whether you own or lease the interests.

Generally, if you own the interests, record a deed that titles your interests to your Revocable Living Trust.

If your interest is a lease, assign your rights as a lessee to your Revocable Living Trust by a written assignment.

How to Fund a Trust with Real Estate

Transferring your real property to your trust will require attention to ownership and tax issues based on the nature of the current title to the property.

Ultimately, the transfer will require preparing, executing, and recording new deeds for each property.

This should be done through an attorney.

Fund a Trust with Anticipated Inheritance, Gift, or Lawsuit Judgment

If you are the beneficiary of the estate of someone who has died, you can assign your interest in the estate or lawsuit to your Revocable Living Trust if you are disabled or deceased before receiving distributions or payments.

How Often Should You Update Your Living Trust or Talk to an Attorney about Funding Your Living Trust?

Review your estate plan with an estate planning attorney every two to three years because all estate plans require ongoing maintenance.

In addition, there are other unique items of value (such as the transfer of airline miles) that will need specific attention in order to determine how they should be handled.

A change in your family, an increase in your net worth, or a change in the tax law could affect the effectiveness of your plan.

Please check out our estate planning checklist or contact Opelon LLP with any questions regarding funding your Trust.