Once you’ve established your trust, now you must go about the process of getting your property into the trust. This transfer must be conducted in a very specific way, or else the trust will not actually meet your needs.
As we always say, a trust is only as good as the property it controls… So how does a trust control property?
Real Estate
Let’s assume that you’ve established a trust, and you want that trust to control your home. The property must be “funded”, or titled into the name of the trust. Instead of “Bob Smith” owning his home as an individual, the deed will now say “Bob Smith as Trustee of Bob Smith’s trust”.
In this situation you must use a trust transfer deed to reflect the change of title, and that document must be filed with the county recorder. This ensures that the home is legally titled in the name of the trust, and that the trust will truly control that property.
This rule applies to bank accounts, brokerage accounts, and other financial accounts. They must be titled in the name of the trust in order to be controlled by the trust.
Retirement Accounts and Life Insurance
Now here’s a catch: A 401(k), IRA, or other retirement account cannot be titled in the name of the trust. In those cases, you will list the trust as a beneficiary of the asset or your beneficiary individually, depending on your situation.. It works this way for life insurance policies, too. For example, parents can leave a life insurance policy to their trust, so that minor children won’t come into ownership of substantial assets before they are able to manage that money.
If you have questions about properly funding your trust, please give us a call. We can help you address your concerns and proceed in a legally sound fashion.