Titles and Schedules: How to Fund a Living Trust Correctly

When Eric dies, his children learn that the most valuable parts of his estate, meaning a house, a brand new car and his bank account, will have to go through the lengthy and costly process of probate even though Eric had a living trust. Why the hold-up? Negligence. Eric created a trust but failed to fund it correctly. He simply hadn’t realized that he would have to retitle his property in the name of the trust rather than his own. Unfortunately, Eric’s error rendered his trust useless.

To prepare a living trust that will serve the purpose of avoiding probate, you must do two things: You must create a trust document, and you must transfer your property into the trust in the right way. The trust document should include the names of your trustee, successor trustee and beneficiaries. It should also contain a list or “a schedule” of your assets. You can list your property in general terms — “all my jewelry” is fine — or you can be specific, but do make sure to avoid ambiguity. Once you’re done, you will need to sign the trust document in front of a notary public.

To fund the trust, you should mentally divide your assets into two categories, those with title documents and those without. Your household possessions, tools, furniture, jewelry, art work and so on belong in the latter category. If you have listed them on the previously mentioned schedule, they are already included in your living trust.

Things get more complicated for assets that come with ownership titles. These include real estate, cars, boats, and planes; bank, stock and money market accounts; mutual funds and bonds; LLC’s, corporations and partnerships. To fund this kind of property into your living trust, you must transfer ownership of the asset from yourself to the trustee of your trust. This usually means completing a transfer form and then filing the form with the appropriate company (e.g. your bank for a savings account) or with the applicable government agency (the DMV in the case of a car.) If you ask a legal professional to help you with your living trust, he or she will most likely do the legwork for you. Could you create a living trust yourself? Certainly. But with the support of an experienced attorney you can ensure that your heirs, unlike Eric’s, will not have to deal with probate after you die.

By Kevin J. Moore

Kevin Moore, Founder of Kevin J. Moore & Associates, is focused in the areas of estate planning, trusts and probate services with additional expertise in both domestic and international business transactions and tax planning and tax controversy representation for individuals and companies.