EST160 - GUIDE: Types of Assets to Transfer to a Trust and How to Complete Transfer

Considerations in Trust Funding

Presented by Timothy Weller

A trust is a common estate planning tool that seeks to manage and control the distribution of your assets in the event of your death or incapacity. But as effective as trusts can be in managing assets, they can be completely ineffective if not properly funded. So, trust funding is a vital aspect of ensuring that the trust performs its intended role.

Many people incorrectly assume that trust funding is complete once the trust document has been signed at their attorney’s office; however, executing the trust document is only the beginning. For a trust to function, the trustee must hold title to the assets owned by and therefore subject to trust provisions; consequently, each asset to be owned by the trust must be retitled to reflect trust ownership. Failure to transfer assets to the trust defeats its management purpose and, in the future, could expose trust assets to the unnecessary time and expenses associated with probate.

What types of assets can be owned by a trust?

A trust can own several different types of property, which include the following:

Cash and liquid securities, including checking accounts, savings accounts, certificates of deposit, and money markets
Non-retirement brokerage and mutual fund accounts
Physical stock and bond certificates
Personal property, such as jewelry, furniture, art, and collectibles
Nonqualified annuities
Life insurance contracts
Real estate
Business interests
Notes and other debt instruments

How do you transfer ownership of property to a trust?

For most assets, transferring ownership is relatively simple:

Bank and brokerage accounts typically require completion of new account paperwork in the name of the trust, along with signed authorization to retitle or transfer assets from the current account to the trust.
Physical stock and bond certificates require a change of ownership to be completed with the stock transfer agent or bond issuer.
Life insurance and annuity contracts also typically require submission of a change of ownership form to the contract issuer.

Some assets require more effort to properly change title:

Personal property without a legal certificate of title is commonly listed on a schedule accompanying the trust to reflect that the trust owns those assets.
Assets with certificates of legal title require that the owner quitclaim ownership interest in the asset to the trust. The attorney who drafts the trust should help you with the quitclaim process.

Other considerations

To avoid unintended consequences, it is very important to fund the trust in a timely manner. It is also important to work with your attorney and advisor when determining which property the trust should own. There are several variations of trusts, and each trust may have a specific role in the estate plan and require specific assets to fund specific trusts.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Tim Weller is a financial professional with Weller Group LLC at 6206 Slocum Road, Ontario, NY 14519. He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at 315-524-8000 or at tim@wellergroupllc.com.