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How to Put Property in a Trust, or Funding a Trust

“How do I put property into a trust?” is a question I often get after someone forms a living Funding a Trustrevocable 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

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2 Comments
  1. 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.

  2. 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.

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