Revocable Living Trusts, Part III: Funding Your Revocable Living Trust

A revocable living trust can provide many benefits, but not if you don’t fund it.

In our previous post, we explained how a revocable living trust is useful in avoiding guardianship and probate proceedings, minimizing estate administration costs, and stipulating how an estate is to be managed and distributed. However, it will accomplish none of those things if your assets are never placed in it.

Transferring property to the Trust

The trustee of a trust only has control over assets that are part of that trust. For property to be included in a trust, title to the assets must be changed. For example, if Jane Doe establishes a trust, title to her assets should be changed to her name as trustee of her trust. Title should also include the date the trust was signed:

Jane Doe, Trustee, under the Jane Doe Trust dated January 1, 2017

The transfer to a trust of real estate holdings, closely held business stock, partnership interests, intellectual property, promissory notes, personal property, and certain other assets, is generally made by the trustor’s estate planning attorney immediately after the trust is signed. The attorney can also prepare the necessary paperwork to help their clients easily transfer their bank and investment accounts into their trust.

Note that some assets are usually not transferred to revocable living trusts, such as IRAs and other tax-deferred plans.

The Pour Over Will

A “pour-over will” is a will that accompanies a revocable living trust. It follows all the same formalities of a will, except that it names the living trust as the beneficiary and directs the executor to distribute any assets not in the trust in accordance with the terms of the trust. Assets not already in the trust at the time of death may be transferred to the trust – but only through probate! So it’s best not to rely on the pour-over will to fund your trust and to do it yourself while you’re alive.

Another option of getting assets into a trust after a trustor’s death is to claim that it was the trustor’s intent to transfer the assets into their trust during their lifetime. This may be done through a Heggstad Petition, which should be accompanied with evidence that the trustor intended for the asset to be placed in the trust (this may include the Schedule “A” list of trust assets that was created by the trustor when the trust was established, and updated periodically during their lifetime). Note that Heggstad Petitions are not always successful, so it’s best not to rely on them, either.

Full Service Estate Planning and Tax Firm in San Francisco

For assistance with the creation, funding, and/or modification of your revocable living trust, contact the San Francisco estate planning attorneys at Moskowitz, LLP.

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