Call us at
(386) 615-9007


Funding a Revocable Trust

Mon, Feb 15, 2016 at 3:35PM

A revocable trust does not avoid probate unless it is “funded”. “Funding” means naming the trust as owner or naming the trust as beneficiary so they pass automatically to the trust upon death. Any asset not in the trust or passing automatically to the trust upon death will require probate. When the Grantor dies, successor trustee distributes the assets to the beneficiaries without probate court involvement.

Non-retirement bank accounts and brokerage accounts are transferred to the trust while the grantor is alive by changing the name on the account to the name of the trust. When using the beneficiary option, banks normally refer to the naming of a beneficiary as “payable on death” or “POD”, while brokerages usually refer to it as “transfer on death” or “TOD”.

It is not possible to change the name on a retirement account (IRA, 401K, etc.) to a trust. However, the Grantor can name a trust as beneficiary. Generally, a married person who intends to leave everything to the Grantor’s spouse would name the spouse as the primary beneficiary and name the trust as alternate or contingent beneficiary.

Sometimes people name their children as beneficiaries of accounts instead of naming their trust. This avoids probate as to that asset. However, if the trust provides that the share of a deceased beneficiary goes to the beneficiary’s children, the grantor should name the trust as beneficiary so that wish is fulfilled. Naming individuals as beneficiaries normally results in the asset passing only to the surviving beneficiaries named on the account.

Personal property, such as furniture, jewelry, and similar items without certificates of title are generally placed into the trust by a Bill of Sale, reserving a life estate to the Grantor. Real estate is transferred to a trust by signing and recording a deed. For homestead property, we use a unique type of life estate deed, in order to preserve the asset protection aspects of homestead. Interests in companies are generally passed to a trust by assignments, which might reserve a life estate.

If a revocable trust is not funded with all assets, the grantor has wasted time and money in creating a trust because it does not accomplish its purpose.

Funding a Revocable Trust

Bookmark & Share

User Comments

Be the first to comment on this post below!