How to Transfer Assets Into a Living Trust

Co-authored by Clinton M. Sandvick, JD, PhD

Last Updated: September 14, 2024 Approved

Living trusts are becoming a popular way to transfer assets without going through probate court. They are relatively simple to establish with the help of an attorney. However, your trust does nothing for you until you transfer your assets. It can be tricky, but by gathering your documentation and approaching it one step at a time, you can successfully fund your trust.

Part 1

Part 1 of 3:

Assessing Your Assets Before Transferring to the Living Trust

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1
Understand the benefits of a living trust. The primary reason to establish a living trust is to avoid probate. By cutting out the legal process to recognize and validate your will, your assets can be distributed to your beneficiaries without the added time and cost of probate.
- A second, and often little-known, benefit is that if you become unable to manage your own affairs, your alternate trustee can step in without having to go through the process of establishing a conservatorship.
2
Categorize your property. Before you can transfer them to a living trust, you need to make a list of your assets and fit each into one of the four main categories. Each type of asset has a different procedure for transferring it into your trust.
- Real property is the first category. This includes your residence, secondary homes, income property, and any other real estate where you hold a full or partial interest. This can include property you own in another state.
- A second category is your cash accounts. This includes checking and savings accounts, as well as Certificates of Deposit^{[1]
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- Your next consideration is financial instruments including stocks and bonds in both privately and publicly held corporations.
- The final category is tangible personal property. This can include your vehicles, boats, furniture, antiques, art, and other collectibles.
- If you want to consider other assets, including retirement accounts, pensions, and life insurance policies, consult with a tax professional before the transfer. Including these accounts in your living trust could trigger tax consequences.
- Some items like Individual Retirement Accounts(IRAs)cannot be placed in your living trust. They must be in your name as they can't be owned by the trust.
- Some of the states do not allow life insurance policies to be owned by a trust.
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A living trust is part of a comprehensive estate plan and it does not negate the need for a will. You need to have a simple will to deal with the assets that you are not including in your living trust.

Part 2

Part 2 of 3:

Transferring Your Assets to Your Living Trust

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1
Transfer your real estate. The lawyer who created your trust can draw up the deeds^{[3]
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- You may have to pay transfer or recording fees. They vary by state, but should be less than $50.
- If there is a mortgage on any of your properties, contact the mortgage company before you start the transfer. You may need permission to add your living trust as a responsible party on the mortgage.^{[4]
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- You also need to contact your title insurance company,^{[5]
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Talk to your bank about local procedures. Some banks require copies of the trust documents before they can open accounts in the name of your trust. Some banks will allow a name change, while others will require you to open new accounts in the name of your trust and close the old accounts. The primary trustees, as well as your alternate trustees, will sign the signature cards. This is critical to ensure seamless transition of your accounts in the event of your death.
Contact either the broker who manages your account or the issuer of the financial instrument. If the organization has specific instructions and forms, you will follow those. In general, you will send a notarized letter stating your intent to transfer the account, the original certificates, a copy of your trust instrument, a power of attorney authorizing only the change in ownership, and an IRS Form W-9.^{[7]
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Tangible property, other than vehicles, can be placed in your trust in one of two ways. First, you can create a written inventory of the goods and make it an addendum to the trust document. The second is to store the items in a safe deposit box that is owned by your trust.
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If any of your tangible items are insured, transfer the insurance in the name of your trust.
- Take some time with the inventory. For collectables, write detailed descriptions and take photos.
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Assign your vehicles to your trust. Vehicles, including automobiles, recreational vehicles, boats, and trailers, require that you transfer the title over to your trust.This is done at the registration office, often called a tag agency, in the county where you live.
- Contact the company that carries your auto insurance to list your trust as an additional insured party. Most states will not transfer vehicle registration without proof of insurance.
- Consult with the registration agency in your county. They may have forms or specific procedures for asset transfers that are not straight sales.
- Make sure you will not be assessed a duplicate sales tax on the vehicle. Speak with the manager or official in charge if necessary.
- Boats are also a special category. If the craft is registered with the state or county, it will have to be transferred over into the name of the trust. If the vessel is over 5 net tons or 25 feet, you may have to execute a federal registration through the Coast Guard.
- If the boat is not subject to any registration requirements, you can transfer title on your written schedule of tangible property.

Part 3

Part 3 of 3:

Ensuring Orderly Dispersal of the Assets of Your Living Trust

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1
Select the right trustee. In a living trust, you will likely be the primary trustee. In a living trust, you can buy, sell, and add assets as you wish. The concern is who will become the trustee if you are incapacitated or pass away.
- If you become unable to make your own decisions, your trust flows straight to the alternate trustees. Most of the time, this will be your spouse. Other choices are adult children or other trustworthy family members.
- Another choice is a professional trustee including your attorney, the bank's trust office, or a trustee company. Strongly consider having a third-party professional trustee as an alternate. If there were to be an accident that claimed several members of your family, your trust could be left hanging.
- All of your alternate trustees will have to be on the signature cards of your financial accounts.
- Only your spouse has the power to name additional beneficiaries.
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Name your beneficiaries to limit challenges. Your trust must name beneficiaries. This can be any person or organization legally able to receive the assets of your trust. However, cutting a member of your family out as beneficiary can lead to a lawsuit challenging the trust.
- Your trust can contain a "no-contest" clause stating that anyone who challenges the trust is automatically disinherited. However, some states have laws that weaken this clause. Consult with your attorney on how best to name and structure your gifts to your beneficiaries.^{[9]
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Have a long term care plan. A living trust should be part of a comprehensive estate plan. If you lose your ability to make your own decisions, your trust can carry on and the assets be used for your care.
- Unless you have long-term care or nursing home insurance, you will likely need help from your state's Medicaid plan to pay for long term residential care. However, changes in the law have made it harder for living trusts to be used as a shelter for assets.
- Any asset transfers made to a living trust within 60 months of your admittance to a nursing home, may trigger a penalty period during which Medicaid will not pay any nursing home benefits.
- Strongly consider discussing your options, including paid-care agreements with your family, with an attorney that is experienced in the law concerning government benefits, estate planning, and elder law.

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Tips

For further protection, create a pour over will stating that any asset left in your name is transferred to your trust after your death.

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Double check the list of assets to make sure you have moved all of them to the trust.

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Keep documents like a certified copy of the trust instrument,federal taxpayer identification number and proof of ownership handy.

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