If your estate plan includes the creation and establishment of a revocable living trust, your attorney probably informed you that your trust can only control the assets to which it has title. Trusts do not control assets held as joint tenants with right of survivorship, assets held in an individual’s name, or assets that are distributed pursuant to a designate beneficiary such as life insurance, IRAs, and qualified retirement plans. The process of actually transferring title to your assets, called “funding the trust” is the one of the most important parts of using a living trust as a foundation for your estate plan.

All too often I have seen cases in which family members ask me to assist them with the administration of a living trust upon the passing of a Settlor (the person who initially established the trust) only to find out that the trust did not have title to all the assets held by the deceased person.

Assets not titled in the name of the trust may have to go through a court supervised probate before being distributed to the named beneficiaries in living trust. A person’s estate which is not fully funded means there may be one or more assets that have to go through probate which, for many clients, was one of the goals they sought to attain by using a living trust!

When new clients come to see me about creating and establishing their estate plans, one of the things I tell them is that the living trust should be considered a reflection of their current circumstances with regard to their net worth, nature and number of family members, marital status, and goals or objectives.

I view living trusts as “living documents”. By that phrase, I mean that your trust should be a dynamic plan which is expected to change over time as the particulars of your life changes. You should expect to amend or change your trust periodically as your life circumstances changes. Some of the life changes which may require a change in your estate planning documents include: death of an alternate trustee, birth of children or grandchildren, dramatic changes in your net worth (both positive and negative), divorce, changes in existing laws.

Many people I’ve met view the creation of their estate plan as a once in a lifetime event that upon completion is not to be seen again while that person is alive. In my view this is a flawed perspective. A couple who comes to see me while in their thirties because they have a newborn will be in a different place when they are in their fifties and their children are adults. Without updating your estate plan, distributions may not be made as you want.

As part of my estate planning practice, clients generally sign the following funding documents, depending on the extent and nature of the assets they own:

Trust Transfer Deed – this document, once signed and notarized, is recorded with the County Recorder’s Office for the county where the real property is located.

Personal Property Assignment – this document transfers title to a person’s tangible personal property to the trust. Such personal property includes furniture, furnishings, cars, collectibles, jewelry, china, silverware, etc.

Certificate of Trust and Letters of Instruction – the Certificate of Trust is a document authorized by the California Probate Code which provides banks and other financial institutions with information about the creation of the trust, the identity of the trustees, the powers of the trustees and the tax identification number for the trust. It enables financial institutions to ascertain the existence of a trust when requested to change the registration on the account. Certificates of Trust do not disclose the personal parts of the trust agreement which include the names of the beneficiaries and the terms and conditions of distributions to such beneficiaries.

There are special funding requirements for certain types of assets. If you have one or more of the assets listed below, you should see an estate planning attorney to be sure such assets are controlled by the terms of your trust. Such assets include (but are not limited to):

It is vital to the implementation and administration of your trust to have all of your assets appropriately titled in the name of your trust…thereby having your trust fully funded. Failure to do so may result in one or more assets having to go through probate which will frustrate your loved ones.

I urge you to take time today to be sure that your bank and brokerage statements are coming to you as trustee of your trust. Look at your real property tax bill to see if the real property is titled in your name as trustee of your trust. Be aware of how your account information reads. Don’t wait until after something happens to find out if things have been done correctly. Give yourself the peace of mind that comes with knowing the hard work you and your attorney put into the creation of your estate plan will accomplish your stated goals because the trust controls all of the appropriate assets.

Note that IRAs and qualified retirement plans that name your spouse as the primary beneficiary should NOT be transferred to your trust. If you spouse is named as the primary beneficiary of your retirement plans, he or she will be able to roll such accounts over into his or her name and thus be able to continue the tax deferral treatment those monies receive.

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