In order for a Revocable Trust to work correctly it must be funded. That means your assets must be put into the name of your trust. The Trust can only govern what it owns. By funding your Trust, the Trust governs those assets. We talk to our clients about the importance of funding their Trust all the time. Since there are different types of assets, there are different ways to fund them into your trust. Bank accounts, for example, are funded differently than life insurance. The rights to royalties or money owed to you are funded in a different manner. Here are three ways to fund assets into your trust.
Change of Title/Ownership
Changing title or ownership applies to assets such as bank accounts and real property. These assets are funded into your Trust by changing the owner of the asset from your individual name to the name of the Trust.
Here is an example:
Current name on ABC Bank Checking Account: John A. Smith
New Title on ABC Bank Checking Account: John A. Smith as Trustee of the John A. Smith Revocable Trust dated April 1, 2010.
Important Fact: The date of your Trust is part of the name.
Assignment of Ownership Rights
These are things such as monies owed to you. If you loan money to someone and have not been paid back yet, you can assign the debt to your Trust. The same goes for royalties, copyrights and patents. Even oil and mineral rights are assigned to Trusts.
These are done through an “Assignment of Interest” and require specific language. Contact your Estate Planning attorney if you need one. They can draft one with appropriate language depending on your asset. Different assets will require different language as part of the Assignment.
Change of Beneficiary
Many people have assets that are beneficiary driven. Meaning that you can’t change the title, but you can change the beneficiary. These are assets such as IRAs, 401Ks and Life insurance policies, and many others.
If you would like to fund these assets into your trust so the money is divided equally, or is used in the manner in which you chose, it is best to name your Trust as the beneficiary.
It may be best to contact your attorney or Financial advisor to help you change the beneficiary on these accounts/assets. For many of these you can contact the financial institution that has these assets and ask them for a Change of Beneficiary form and update your beneficiary that way.