So you have a trust. You’re Awesome! You’re on the right path to have smooth, efficient, and effective estate planning. One of the most important parts of your trust is to make sure that your assets are titled in the trust as appropriate. Let’s talk about how to title assets in your trust.
Funding the Trust
Transferring assets to your trust is also called funding the trust. I often compare a trust to a bucket you create and fill with assets. The trustee holds the bucket handle (and its assets) “in trust” for your beneficiaries. A trust helps you avoid probate. To get the maximum benefit of the trust, and avoid probate, it is crucial that you properly fund it.
How to Title Assets in Your Trust
Different types of assets require different processes. Some must be retitled and others may be able to name the trust as a beneficiary.
To transfer real estate the owner signs a deed transferring the property from their name into the name of the trust then files the deed with the county recorder. Real estate must be retitled in the trust name to avoid probate. If you own property jointly, when one joint owner dies, there is no probate for the surviving owner to take full ownership. However after the second joint owner dies, probate is necessary to transfer ownership. That is unless it is in trust. An attorney or title company can help you prepare a deed transferring your real estate into your trust.
Personal property is possibly the simplest thing to transfer to your trust. There is no title owner to your personal property, unlike your home, accounts, or vehicles. When you establish your trust, you should also sign a general “Assignment of Assets” to your trust which references personal property. You basically declare that your trust is now the owner of your personal property.
You can change the title to your vehicle through your local Department of Motor Vehicles. In Utah (and most states) there is no probate upon your death to change title to up to four vehicles. So while you may change title of vehicles to the trust, it is not necessary to avoid probate in most cases.
There are two parts to life insurance changes:
Beneficiary Designation – There is no probate for life insurance if there is a named beneficiary on the policy. You should always name a beneficiary of your life insurance policies, and the beneficiary should be your trust. You can request a change of ownership from your life insurance company or agent. If your policy is an employee benefit, you can work with your HR department. Sometimes you can login to your account with the insurance provider and make the change.
Ownership – In most cases it is ok to leave the ownership of the policy as-is (e.g. in your name). I recommend changing ownership of life insurance policies if it is an specific part of your estate plan. An example would be changing the ownership of the policy to an Irrevocable Life Insurance Trust for estate tax planning. You can request a change of ownership from your life insurance company or agent. If your policy is an employee benefit, you can work with your HR department. Sometimes you can login to your account with the insurance provider and make the change.
Bank Accounts – There are two options for bank accounts.
Change Ownership – You can request that your bank change the ownership of the policy to the trust name. Depending on your bank, this may or may not require a new account number. You will provide a copy of your trust or a certification of trust to the bank. The trustee(s) will be the authorized signer on the account.
Pay on Death Designation – In most cases it is simpler to go to your bank and request that they list your trust as the Pay on Death Beneficiary of your account. This will be similar to life insurance. Upon your death, when your bank sees a death certificate they will close your account and transfer the funds to your trust. At that time your trustee will need to open an account in the trust name (if the trust doesn’t have an account already).
I recommend the same thing for investment/brokerage accounts as personal bank accounts. Generally the only time I recommend changing ownership of these accounts is when we specifically want the account to be owned by a particular trust (such as a separate revocable trust or an irrevocable trust). Otherwise naming a pay on death beneficiary will avoid probate upon your death.
Retirement Accounts (IRA, 401k, 403b etc.)
Like life insurance, you can name primary and secondary/contingent beneficiaries of your retirement accounts. You should always name a beneficiary of your retirement account to avoid probate. Often the primary beneficiary will be a spouse and the secondary beneficiary will be children. When naming a trust as the beneficiary of a retirement account you may lose the ability to “stretch” tax deferral. Your attorney can help advise you on the best way to name beneficiaries of retirement accounts in your particular circumstances.
If you have ownership in a business, you can amend the business ownership records to show your trust as the owner. Different business types require different documentation and some may require updates to the state records where ownership reporting is a requirement (not all states require ownership to be listed on state business entity registration).
I hope this simple guide of how to title assets to your trust is helpful. Your estate planning attorney can advise on all of the above and can help complete some for you (preparing and recording deeds, preparing updates to business ownership). Some of these will require some of your own legwork, however your attorney should guide you and follow through to make sure things are done. Your investment advisor and life insurance agent will also be very helpful in getting this done. Remember, your trust doesn’t reach its full potential until you transfer assets to your trust.