Updated: Aug 28
Revocable trusts are a very popular and useful estate planning tool. They are an effective way to avoid probate and provide for asset management in the event of incapacity.
However, you can’t take advantage of what the trust has to offer if you don’t place your assets into it. The terms of a revocable trust only control the assets it owns.
In addition, not funding your trust can undermine your whole estate plan. If you don’t fund the trust, your assets may have to go through a costly probate proceeding or be distributed to beneficiaries you did not intend.
To place bank and investment accounts into your trust, you need to retitle them as follows: “[your name], as Trustee of [trust name].” Depending on the institution, you might be able to change the name on an existing account. Otherwise you will need to open a new account in the name of the trust and then transfer the funds. The financial institution will probably require a copy of the trust (or a Certification of Trust, which should be part of your estate planning package). As long as you are serving as your own trustee or co-trustee, you can use your Social Security number for the trust.
If you are placing real estate into the trust, you will need to record a Deed. You should consult with an attorney to ensure it is done correctly. You should also consult with an attorney before placing life insurance or annuities into a revocable trust and before naming the trust as the beneficiary of your IRA or 40(k) (because that could have tax consequence).
Once your trust is fully funded, don’t forget to maintain it. When you acquire new assets, do so in the name of the trust (or transfer them immediately to your trust). To be on the safe side, you should make a point to annually review your assets to make sure everything is titled properly.