I have written at various times in the past about re-titling your assets after you have established a trust, and emphasized the importance of this process.
When you establish a trust, the objective is to facilitate the management, and eventual distribution, of your assets. To make that work, there must be assets that are owned by the trust. Transferring assets to a newly established trust is, in estate planning lingo, “funding” the trust.
Nathan B. Hannah, attorney
You don’t always transfer assets to a trust immediately after the trust is created. Sometimes there are reasons to delay that step. In some situations there is a document that spells out the terms of a trust, but the trust isn’t actually established until some future event occurs.
Ordinarily, however, when a revocable trust is established, the objectives of the trust will be best achieved by transferring assets to the trust immediately. How is this accomplished?
Ownership of real estate is transferred by the owner executing and recording a deed. Transferring real estate to a trust is no different. For a typical revocable trust, the owner of the property transfers it from herself in her individual capacity, to herself as trustee of the trust, by executing and recording a deed that says just that. That’s all there is to it.
Changing the ownership of financial assets, like bank accounts and brokerage accounts, so that a trust is the owner, is usually simply a matter of the account owner completing whatever forms the financial institution requires. Typically, but not always, the financial institution will also want a copy of the part of the trust that identifies the trustor (the person establishing the trust) and the trustee.
With some assets it’s a little harder to change the ownership. One example is stock certificates. This usually involves sending the certificate to the transfer agent with an instruction signed by the owner of the shares, telling the transfer agent to change the ownership. The signature on those instructions usually must have what’s called a medallion guarantee. It’s cumbersome, but manageable.
Bonds, particularly government bonds, have their own rules. As with stock, it’s a matter of following the bond issuer’s rules for changing the ownership of the bonds on the issuer’s books, then re-issuing the bonds, so that your trust is the owner
The point of all this is that when you establish a trust for the purpose of distributing assets to your beneficiaries, you have to make the trust the owner of the assets or it doesn’t work. Generally, any asset that doesn’t have a built-in mechanism for transferring it if the owner dies (for example, an account with a pay-on-death or “POD” beneficiary) is a candidate for inclusion in your revocable trust.
Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,
Contact Attorney Hannah: nhannah@dmyl.com or 520/ 322-5000
This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.
