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Learn How To Fund An Estate Plan

Funding a Revocable Living Trust

When your client’s estate plan includes a revocable living trust, ownership of assets must be transferred to the trust. Transferring ownership from your client as an individual to your client as trustee of their trust is referred to as “funding the trust”.
Changing ownership occurs on an asset-by-asset basis, one asset at a time.The funding documents you need to complete with your client are found in each client’s estate-planning binder under the Red Tabs.

We know that transferring real estate into a trust and doing the deed preparation associated with it can be tedious and overwhelming. With Estate Guru Professional it is simple. Simply click on the link below that will take you to our deed preparation site where you can do your clients’ property deeds for $150 each.

As an alternative to our deed preparation services, you can also have your client go to their local title company where they can also take care of their deed preparation and title transfer needs.

We know there are many different types of assets that your clients will possess. To help you assist your client with the funding of their trust we have provided detailed instructions on how to complete and execute the most common funding documents. Click here to download our funding guide from our deed preparation site.

How to transfer real estate or property into a trust

For most people the real estate they own will be the largest financial asset they have. Making sure their real estate is correctly funded into their trust is a critical task.

The ownership of real estate is evidenced by a deed. Each deed is unique and only one deed exists at any given time for any specific piece of property. A new deed is created every time the real property is bought or sold or ownership changes in any way. Deeds are recorded by the County Recorder’s Office so that there is a public record of who owns what property, at any given time as evidenced by the vesting (i.e., ownership) language on the deed.

To complete the transfer of ownership of real property to a trust, you must:

Step 1. Complete the deed

Step 2. Execute the deed

Step 3. Record the deed with the County Recorder (in California use a PCOR form)

If you would like assistance with this process, click here to order a new deed from our deed preparation or to download our funding guide.

How to transfer financial assets (not real estate)

The institutions that manage your client’s financial assets such as banks, mutual funds, brokerage firms, managing partners in the case of limited partnerships, insurance companies etc – have identified your client as the legal owner of the assets under their management or control.
The legal owner on the institution’s records must be officially changed to reflect your client’s trust. Your client must contact the managing institution directly to change the legal owner. Each institution will have its own forms and process that they require you to follow to change the ownership.

A change of ownership notification letter requests that the managing institution initiate whatever is necessary to facilitate the change of ownership from your client as individuals to your client as trustee of their living trust.

Some attorneys like to have an asset assignment form signed as well to ensure that the asset can be placed into the trust by the probate court if by chance the client was to die before the institution officially changed title.

Gathering the information about a client’s financial assets on the “Assets” tab in the Estate Guru Professional Platform is absolutely crucial. It will allow you to keep track of the institutions where your clients’ financial assets are held and to have their account numbers listed at the ready. Additionally, it will list these assets out specifically within your clients’ trust.

Assets with named beneficiaries (Insurance, IRA, qualified plans, etc)
Assets with named beneficiaries include: annuities, life insurance policies, IRAs, 401K plans, pension and profit sharing plans and employee benefits.
Assets with named beneficiaries are not subject to probate and therefore do not need to be owned by your client’s living trust. As a result, the ownership of these assets is not assigned over to the trust, but rather the trust is named as a contingent beneficiary on these assets.

You leave the primary beneficiaries alone and add the new trust as second or contingent beneficiary. Upon death, the asset will be given to the individual named as the primary beneficiary and should the primary beneficiary have predeceased the owner the asset will flow into the living trust and be distributed by the provisions of the trust.

After listing these assets out in the assets tab of the Estate Guru Platform be sure to have your client contact the institutions that hold these plans and have them designate the beneficiary of these plans as their living trust.

Things to remember when assisting with funding
You are free to define the scope of the estate-planning services you offer to your client. You can choose the level of involvement in funding the trust that you desire – from simply directing the client to contact us for assistance, to acting as notary for funding documents included in the binder, to following up to ensure the formal transfer occurs.
As you determine what level of funding assistance to provide keep in mind the following compliance guidelines:

Your client is trustee of their living trust. As trustee they have a fiduciary responsibility to manage the affairs of the trust. Paramount among their ongoing duties is to make sure trust is current and up-to-date at all times and that the trust is officially identified on title to their assets. Make sure the scope of funding assistance you offer does not remove the client’s fiduciary obligation.

Remind your client of their fiduciary responsibilities for keeping their trust funded whenever you meet with them. Documenting that such a “reminder” is part of your standard operating procedures during your annual review appointments helps to limit against any accusations that you neglected to assist with keeping the trust funded.

Every time you meet with your client, inquire about the ownership of assets. Ask questions like, “Is everything you own included in your living trust? Have you acquired any new assets that I am not aware of since we last met?” Routinely asking these kinds of questions helps limit your liability, if at death any assets for are some reason not properly funded.

For instructions on how to fund any specific asset, follow the detailed funding instructions provided. If you are confused or are not sure which funding documents to use, contact us immediately.

Assets owned outside the trust are not controlled by the trust document. Unless instructed otherwise by legal counsel, the general rule is that titles to all assets are to be changed to show the client’s trust as owner.
Assets with named beneficiaries – insurance policies, IRA accounts, etc – do not need to be owned by the trust. Upon death assets with named beneficiaries pass outside the trust and the process of probate and are distributed directly to the individuals named as beneficiary.

Ownership to real estate is evidenced by a deed. The legal description is a critical part of the deed. Check and double check to ensure that the legal description placed on the new deed is an exact replication of the legal description on the existing deed. If the legal description is lengthy it is often better to simply photocopy the legal description from the existing deed and attach it to new deed. Do not photocopy anything from the original deed but the legal description. If anything but the legal description is photocopied often the County Recorder’s office will return the deed for re-submission.

Things to avoid when assisting with funding
You are free to define the scope of the estate-planning services you offer to your client. You can choose the level of involvement in funding the trust that you desire – from simply directing the client to contact us for assistance, to acting as notary for funding documents included in the binder, to following up to ensure the formal transfer occurs.
As you determine what level of funding assistance to provide keep in mind the following compliance guidelines:

Do not notarize any funding document that is not complete – make sure all applicable blanks are completed prior to notarization.

Do not notarize any funding document prior to the client’s actual signature. Notarization is the legal documentation that the client signed the paperwork and must occur simultaneously with signature.

Do not take completed deeds to County Recorder on behalf of client. Once you take possession of original documents you become legally liable for any delays undue that may occur. Provide a stamped, pre-addressed envelope, submission forms from county (i.e., PCOR form if property is located in California ), etc – but client should retain responsibility for the deed’s actual submission.

(Note: It is standard practice to record simultaneously irrespective of the benefits that may be derived from delayed recording. The benefits to delaying the recording – maintain higher level of privacy, avoid potential hassle with mortgage company, do not jeopardize any existing homestead protection. Downside to delaying the recording – loose or misplace the deed, appearance that the property was inadvertently left out of the trust opens door for accusations that you did “sloppy” or unprofessional work. Because simultaneous recording is the accepted standard you have less liability.)

Do not argue with financial institutions that refuse to change title per your client’s instructions. Contact us immediately if your client experiences resistance to any request to change title. It is a matter that the attorney will have to address directly with the institution’s legal counsel.

Do not attempt to make your client’s living trust the owner of their IRA accounts. By law IRA accounts are already “in trust” managed by a third-party trustee (i.e., the bank or Mutual Fund Company, etc). Since your client has total control over their living trust, naming their living trust as owner would essentially be a distribution and make entire balance of the IRA subject to immediate income taxation. The client’s trust will be identified as a beneficiary designation not as an owner. If you have any questions on how to integrate IRA accounts into the trust, contact us.