Skip probate
Putting things into a living trust
Signing the trust is step one. Moving things into it is the part people skip.
A living trust only covers property that's been moved into it. Lawyers call this funding the trust. Anything left in the person's own name usually goes through probate anyway, even with a signed trust in the drawer.
How each kind of property usually goes in
| What you own | How it's usually moved | Who handles it |
|---|---|---|
| Home and other real estate | A new deed from the owner to the trust, recorded with the county | Often the lawyer who drew up the trust, or the owner |
| Bank accounts | Retitled in the trust's name, or the trust named as payable-on-death beneficiary | The bank |
| Investment accounts | Retitled in the trust's name, or the trust named as transfer-on-death beneficiary | The brokerage |
| Retirement accounts (IRA, 401k) | Usually not moved in. A person is named as beneficiary instead | Plan administrator or HR |
| Life insurance | The trust or a person named as beneficiary | The insurer |
| Cars | Rules vary. Some states allow a TOD title instead | State DMV |
| Belongings like furniture and jewelry | Often a one-page assignment signed with the trust | The owner |
Example: moving a house into the trust
Say Maria owns her home in her own name and has just signed a living trust called the Maria Lopez Living Trust, with herself as trustee. Here's how the house typically goes in.
- Find the current deed, the document that shows Maria owns the house. A copy can usually be ordered from the county recorder's office if she can't find it.
- Prepare a new deed transferring the house from "Maria Lopez" to "Maria Lopez, Trustee of the Maria Lopez Living Trust." Many people have the lawyer who drew up the trust do this. Some states have simple forms.
- Maria signs the new deed in front of a notary.
- The deed is recorded with the county recorder's office where the house is. There's usually a recording fee, and some counties ask for a short transfer form. Many states don't charge transfer tax when the move is into the owner's own revocable trust.
- Maria tells her homeowner's insurer, which may add the trust to the policy, and checks with the county that any homestead tax break carries over.
- A copy of the recorded deed goes in the binder with the trust.
Maria still lives in the house, pays the mortgage and handles it exactly as before. When she dies, her successor trustee can sell it or pass it on under the trust's terms without probate.
Things families commonly run into
- Retirement accounts are a special case. Moving one into a trust can count as cashing it out, with taxes due. Naming a beneficiary is the usual route.
- New property bought later, like a second home or a new bank account, isn't added automatically. Many people forget.
- Refinancing a home can take it out of the trust. Some lenders ask for the home to be moved out during the loan and it never gets moved back. Many others don't: Fannie Mae's rules, which many lenders follow, allow loans to homes held in a revocable living trust.
- Banks and brokerages usually ask for a short summary of the trust, often called a certification of trust, rather than the whole document.
Many families keep a list in the binder of what's in the trust and where each item is held. It helps the successor trustee know what to look for.
Moving a home into a trust usually doesn't change the mortgage or property taxes, but rules for homeowner's insurance and some local tax breaks vary. Many families check with their insurer and county.