Funding Your Revocable Living Trust
A Client Checklist from Oakleigh Wealth Services
Setting up a revocable living trust happens in two stages. Signing the documents is only the first step. "Funding" the trust is the second, and it is the one that actually makes the plan work.
Funding means ensuring your assets are connected to the trust, either by changing how an asset is titled, by aligning the beneficiary you have named on it, or by formally assigning it to the trust. A trust generally controls only the assets placed in it. Anything left out may still pass through probate at your death, which is often precisely what the trust was meant to avoid. So the goal of this checklist is simple: walk through your assets one category at a time and make sure each is handled.
This is an informational guide, not legal or tax advice. Some of the steps below, especially anything involving deeds, business interests, or beneficiary designations, should be done with your attorney and, where taxes are involved, your tax advisor. We are glad to help coordinate.
The three ways an asset gets into a trust
It helps to know which method applies before you start, because it differs by asset type.
Retitling. You change the registered owner of the asset from your name to your trust's name. This is how real estate, bank accounts, and regular (non-retirement) investment accounts are usually handled.
Beneficiary designation. You do not change the owner; instead, the account pays out at death to whomever you have named. This is how retirement accounts, life insurance, and annuities work. These deserve extra care for the reasons noted below and are best reviewed with your attorney or us before you change anything.
Assignment. A short document transfers ownership of things that do not have a formal title, such as personal belongings or a business interest. Your attorney typically prepares this.
The checklist
☐ Real estate
Home and other property retitled to the trust, or covered by a transfer-on-death deed.
Your attorney prepares a new deed naming the trust as owner and records it with the locality. In Virginia, a transfer-on-death deed is an alternative if you would rather keep the property in your own name during your lifetime. If you have a mortgage, transferring your residence into your own revocable trust generally does not trigger the loan's due-on-sale clause, but it is good practice to notify your lender and to confirm your homeowner's insurance and the tax records are updated to reflect the trust. Property in another state should be retitled under that state's rules to avoid a separate probate there. You will know this is done when you have a recorded deed showing the trust as owner.
☐ Bank and credit union accounts
Accounts retitled to the trust, or a payable-on-death designation added.
Most banks will retitle an account into the trust's name once you provide their form and a copy of your trust certificate. For a checking account you use day to day, you may prefer to leave it in your own name and simply add the trust or your heirs as payable-on-death. Either approach can be fine; the point is that the account is not left to pass through probate by default. You will see the trust named as the account holder on your next statement.
☐ Investment accounts that are not retirement accounts
Taxable brokerage and similar accounts retitled to the trust.
The custodian handles this with a trust certification form. We can coordinate accounts held with us directly. For accounts held at another firm, you will need to complete that firm's process; let us know and we can walk you through it.
☐ Retirement accounts (IRA, 401(k), 403(b), and similar)
Beneficiary designations reviewed with your advisor. Do not change these on your own.
These accounts cannot be retitled into a trust without creating a taxable event, so they pass by beneficiary designation instead. Whether to name a person or the trust is a significant decision with real tax consequences, particularly the rule that most non-spouse beneficiaries must withdraw the entire inherited account within ten years. Naming a trust can be the right move in some plans and the wrong one in others. Please review your designations with your attorney and us so they fit your plan, rather than changing them based on this checklist alone.
☐ Life insurance
Beneficiary designations reviewed against your plan.
If your plan routes insurance proceeds through a trust, for example into a separate trust for young children, the policy's named beneficiary needs to match that structure. This is worth confirming together rather than guessing.
☐ Annuities
Beneficiary designations reviewed with your advisor before any change.
Annuities also pass by designation. Naming a trust as the beneficiary can reduce or eliminate tax deferral that your heirs would otherwise have, so this is another one to review with us first.
☐ Business interests
Any LLC, partnership, or corporate interest reviewed for transfer to the trust.
Moving a business interest into a trust may require specific steps under the operating or partnership agreement and may carry tax consequences. S-corporation shares, in particular, have eligibility rules that a trust must satisfy. Coordinate this with your attorney and your CPA.
☐Personal property and other assets
Personal belongings covered by a general assignment, with a memo for specific items.
Furniture, jewelry, collections, and similar belongings are usually covered by a general assignment your attorney prepares. A separate personal property memo lets you specify who receives specific items. Other assets such as money owed to you, royalties, or intellectual property can also be assigned to the trust. Vehicles are often omitted for simplicity.
Know what stays outside the trust
Two kinds of assets pass on their own, regardless of what your trust says, so it is worth checking that they line up with your wishes.
Jointly owned property with right of survivorship passes automatically to the surviving owner. Confirm that is what you intend.
Any account with its own beneficiary or payable-on-death designation pays to the person named on it, even if your trust or will directs otherwise. This is the most common reason an estate plan does not work as expected, so it is worth a careful look.
Your will as a backstop
Your plan generally includes a "pour-over" will that catches anything left out of the trust and directs it into the trust at your death. This is a safety net, not a substitute for funding, because assets caught this way still go through probate first. The more you fund now, the less your will and executor have to clean up later.
Keeping it current
Funding is not a one-time task. Revisit this checklist when you open a new account, buy property, change banks or custodians, or have a major life change such as a marriage, divorce, or new child. For accounts we do not manage directly, please review the beneficiary designations periodically, since we are not able to see or update those for you.
