Funding the Trust

For the revocable trust to be effective in eliminating probate, it is essential that all family assets be transferred into the trust prior to a spouse’s death. Any property that has not been transferred into the trust will be subject to probate, defeating the purpose of creating it in the first place. An amazing number of people go to the trouble and expense of forming a revocable trust and then fail to complete the work necessary to fund it.

Funding the trust involves transferring legal title from husband and wife into the name of the trust. For example, if Harry and Martha Jones are funding their revocable trust, they will change title to their assets from “Harry Jones and Martha Jones, husband and wife” to “Harry Jones and Martha Jones as Trustees of the Jones Family Trust, Dated January 1, 1999.”

For real estate, the change in title is accomplished by executing and recording a deed to the property. Bank accounts and brokerage accounts can be transferred by simply changing the name on the accounts to reflect the trust as the new owner. Shares of stock and bonds in registered form are changed by notifying the transfer agent for the issuing company and requesting that the certificates be reissued in the name of the trust. Stock in a family owned corporation can be changed by endorsing the old stock certificate to the trust and having the corporation issue a new certificate to the trust. Other types of property can be transferred by a simple written declaration called an Assignment.

The living trust also can be funded indirectly by transferring interests in other entities. For example, if you hold your property in a Family Limited Partnership or Limited Liability Company, the living trust can hold your shares in those companies.