There are two main ways of funding a trust, and which one you use depends on the asset.
Assets may be funded into the trust while the grantor is alive or upon their death
You may encounter retitling or transfer fees when funding a trust
After funding an irrevocable trust, you may not be able to remove the assets from it
After you've set up a trust, you need to fund it by transferring assets into it. A trust that doesn’t hold any assets or property isn’t useful, especially as part of an estate plan. There are generally two ways of funding a trust. The trust creator, called the grantor or trustor, can designate the trust as a beneficiary of an asset or they can retitle ownership — this involves changing the owner of an asset from the grantor to the name of the trust. Naming the trust as owner may be written something like this: Trustee’s name, Trustee of the John Doe Family Trust and should appear on your trust document, or certificate of trust, which you can use during the trust funding process to show proof that your trust exists.
People often open a trust for more control over how money and assets are passed to their heirs, and more complex trusts have additional benefits, like reducing estate taxes. You can provide instructions in your will to transfer assets into a trust, whether it’s a trust created during your lifetime or a testamentary trust created when you die. Keep in mind that assets transferred according to a will don’t avoid probate. Additionally, revocable trust assets can be removed at the grantor’s discretion, but when you transfer assets into an irrevocable trust — which cannot be changed — it will be very difficult to "unfund" it or remove any trust assets.
To fund a house or any other real estate property into a living trust you must create a new deed to transfer the property. Retitling the house into the trust doesn't typically affect the terms of a mortgage, but you should notify the lender, along with any HOA association, or co-op board. (Some co-ops may not allow you to place your property in trust.) You should also notify the title insurance company and homeowners insurance company to change the name from yours to the trust's. After the deed has been completed and notarized, you may be required by your state to record it with the county clerk or land recorder's office and pay a filing fee.
See whether putting a house in a trust is the right move for you.
In states that allow a transfer on death deed, you can designate the trust as a beneficiary to receive the house upon your death.
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Cars and other vehicles with a title can also be transferred into the trust by retitling. You must typically visit the DMV to file the paperwork and change the car’s title. You may also have to show proof of your trust, which you can do with a certificate of trust, provide proof of auto insurance, and pay fees. Boats and other vessels may have additional registration requirements in your county or state.
Some of your belongings and assets — like your fine jewelry, antique furniture, or rare book collection — may not come with a title or any official evidence of ownership. To make them trust property, you need to assign ownership, by creating a document that explicitly names and describes them.
You can open a revocable trust with step-by-step instructions with Policygenius.
If you are setting up a trust fund for someone to use immediately, then you’ll need to make sure there’s money in it. A trust also has its operating costs — see how much a trust costs. You can fund your trust with a savings account, checking account, or money market account and the procedures for doing so can vary based on the bank or credit union. Some financial institutions will let you rename your account with the name of the trust, or you may have to open a new account for the trust and transfer the money into it.
Similarly, if you want the trust to make investments, you can open a new brokerage account for it or you may be able to transfer an existing account into the trust’s name. Stocks and bonds may also be transferred and reissued to the trust. Reach out to your broker or financial advisor if you have more questions on how to transfer securities into your trust.
Certain financial assets should be made payable or transferable on death to the trust. A beneficiary designation allows an asset to pass directly to someone outside of probate. You must fill out a form with whoever holds the asset and designate your trust as the beneficiary. You can fund your trust via beneficiary designation for the following assets:
Retirement accounts, like 401(k) plans and IRAs
MSAs (medical savings accounts)
HSAs (health savings accounts)
Life insurance policies
When you name your trust as the beneficiary, the funds or account assets are paid out or transferred to the trust. Then your trust assets are managed and distributed according to the terms you set. The benefit of funding your trust this way is that you will have more control over the trust funds and can prevent a spendthrift beneficiary from spending it all at once. You could choose to distribute money in periodic installments or have the trustee invest according to your terms.
If you have life insurance, you can also make the trust the owner of the policy, effectively creating a life insurance trust. Transferring ownership allows the trust to be the account holder and pay the premiums, while also reducing your estate tax liability. Read more about how an irrevocable life insurance trust (ILIT) works and if it’s right for you.
Having a trust own business interests could make transitions smoother for your heirs when you pass away. There are different procedures depending on the structure of the business. If you have partners or shared interest in a small business, you typically need to get approval from other partners before you transfer your interest. Speak with an estate planning attorney for more information.
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Elissa Suh is a personal finance editor at Policygenius in New York City. She has researched and written extensively about finance and insurance since 2019, with an emphasis in esate planning and mortgages. Her writing has been cited by MarketWatch, CNBC, and Betterment.
Elissa has a B.A. in Film Studies from Barnard College.
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