“How do I put property into a trust?” is a question I often get after someone forms a living revocable trust. This is an important question. Putting property into a trust is also known as funding the trust. Funding a trust is the engine that runs a trust. Until the property is held by the trust, you cannot take advantage of the trusts benefits.
To discuss how to put property into a trust, let’s begin with some vocabulary. The person who owns the property and then transfers it is known as the grantor. Note that the grantor is granting his property to the trust. When the grantor signs over the property to a trust he is funding a trust. The trust is then administered by someone known as the trustee, who follows the directions within the trust to care for the property.
The person who will receive the benefit of the trust is the beneficiary. When you make a Living Revocable Trust, you wear all three hats. You are the grantor, the trustee and the beneficiary, until your death.
Funding a Trust – What Property to Use
Before you put property into a trust you need to know what property to use in funding the trust. Some think that you put all of your most valuable property into the trust, but that is only half true. People can own some very valuable personal property that should not go into a trust. For example, you would not need to put you Stradivarius Violin in a trust because it can be sold without you signature. It can be listed in your will instead.
The best indicator that something should be put into a trust is that it would require you to sign your name when you sell it. You would not be able to do this if incapacitated or dead. Once property has been granted into the trust, the trust lives on forever, and whoever is the current trustee (you if alive, someone else if you are dead) can sign to sell the property within that trust without having to go through probate. When considering “how to put property into a trust,” you should think of following types of property:
Bank and Brokerage accounts: To transfer a bank account into the trust, you need to take a copy of your trust or a “Certificate of Trust” into the bank and tell them what you want to do. They take a copy of your documents and ask you to sign a new signature card as the Trustee. This is the quickest way to put property into a trust. I have taken more time waiting for a teller than in performing the entire transaction. This process is the same with a broker for your existing stocks, and once your trust is set up with your broker, all new purchases should also be in the trust’s name. If you don’t have a broker then you need to purchase all future stocks in the name of your trust.
Home and Investment Real Estate: To transfer real estate into a trust, you will need a quick claim deed with an exact property description of the property you own. Besides the exact property description you will need to make certain that all the names on the deed read exactly the same as they read on the deed. Once that is in order, you should take the deed down to the county recorder and record it. This is also a pretty quick step in the process to put property into a trust.
Company Stock: A much overlooked facet of funding a trust is company stock. If you own your own small company you must make certain you issue and use your company stock or membership certificates in the name of the trust in order to fund your trust. Hold a meeting and resolve to issue new stock or membership certificates and then get it done.
Government Savings Bonds: If you hold treasury bonds you do not sell them and buy them back in the name of the trust. Google REQUEST TO REISSUE UNITED STATES SAVINGS BONDS or click the link and use that form to transfer the bonds into your trust.
How to Put Property into a Trust Caveats
Personal Property: Personal property does not need to be listed in your trust. It can be transferred easily without a legal process. This does not mean that it won’t cause a family fight, but it does not need a judge to sign off on it to have it transferred.
Cars: I know that cars are something that you need to sign you name to sell. However cars are also a big liability problem, so you don’t want them in you trust. The state has made it easy to transfer title to a car without a court proceeding, so you don’t need to hold a car title in your trust.
Retirement Accounts, IRA’s, 401(k)s etc.: Retirement accounts should not be owned by a trust, but you can still avoid probate if you designate your beneficiaries in the documents and them put your trust as a follow up beneficiary.
Life Insurance: You can get the best tax benefits by holding your life insurance in a life insurance trust. I would recommend setting one up, as it could save your family half the value of the insurance in estate tax. Life insurance does not need to be held in your trust because the proceeds are distributed according to theaters of the policy and the court does not need to be involved.
Ignoring estate planning is like trying to build a house from the roof down. Without this foundation in place, everything collapses; people lose money in the form of probate, state estate taxes, and federal estate taxes. All this can be avoided by funding a properly-set up trust. Putting property into a trust is not difficult. It takes some time, but it is the best way to bring your trust up to date. Once you have taken care of funding a trust, you then need to keep it up to date by putting in future purchases of real estate, stock or bonds into the trust. My book Protecting Your Financial Future is a complete discussion on how to take care of your personal estate. It is an easy read, full on interesting stories and helpful scenarios.
By Lee R Phillips
What about HSA (Health Savings Account)? Even though it says savings it is actually a checking account plus it is a hybrid of retirement account that gives you immediate tax deduction plus it can grow and money removed tax free. But you can only qualify with a high deductable health insurance which is in your name.
When a HSA account is created you will name beneficiaries for the account who will receive the funds after your death. This means that an HSA account is similar to a retirement account and does not need to be put into the trust. These beneficiaries can be changed at any time. Just contact your HSA account holder and ask them how to change the beneficiaries.
I wanted to thank you for explaining how to put a property in a trust. It’s nice to know that you don’t want to put cars in your trust. Maybe it could be good to first know what shouldn’t be put in a trust to get a better idea of what you can put in.
Thanks for the great idea. In answer, I made a video on what not to put in a trust. You can find it on YouTube at https://youtu.be/DRSor5jcTXE
Good idea. We ran with it and made a new video called “What NOT to Put in a Trust” and inserted it above. Thank you!
My uncle was diagnosed with a terminal disease and wanted to settle his affairs right away. It was explained here that when funding a trust, he should decide on what property will he use. Furthermore, it’s recommended to hire an experienced estate planner for the best outcome.
Assets that require his signature will need to go into the trust. The trust should allow the family to avoid probate on those assets it “owns.” Only assets that require a signature need to be put into the trust. He can still use the assets when they are held in the trust. He will likely be the trustee (manager) of the trust and the beneficiary of the trust, so he will manage and use the assets just like he always has.
Hello Mr Phillps,
Regarding beneficiary assignment and directives for HSAs –
Is it possible for a trust to establish that the HSA beneficiary (assume it to be an individual person) be restricted to use the HSA funds they receive only as originally intended – ie. only for reimbursement of qualified medical expenses? I would not want the beneficiary to simply ‘cash it out’. Rather, I would want it to benefit them for legitimate medical expenses.
Likewise question for Retirement Accts –
An HSA is governed by the HSA document. If it is a big company that has the HSA, you are stuck with the terms of the contract they have governing the HSA. If it is your little company, you can control the terms of the HSA contract. It is hard to control retirement plans and HSAs from the grave. The named beneficiaries have control over the money they get in distributions or cash outs. The best thing to do is educate the beneficiaries as to the value of leaving the money in the retirement accounts / IRAs / benefit plans, and hope they are smart enough to follow your instructions. If you make a trust the beneficiary, then the heirs can’t “stretch” their inheritance of the qualified money (retirement/benefit plans), so that somewhat defeats the purpose of having the beneficiaries keep the money in the qualified plan or IRA.
what about naming your trust? a lawyer in LA recommended to leave the word “revocable” out of your living trust title. only use in the contents of your trust. reason being if in the near future if you become ill and need long term care, it’ll drain your assets and if your trust named ” revocable living trust” i’ll make it so much harder to change to another trust. https://www.youtube.com/watch?v=7w-fqqQ14VY.
do you agree what he said?