How do you fund a trust and move assets into it correctly?
Funding a trust is the practical process of moving assets from your individual ownership into the legal ownership of a trust so the trustee can manage and distribute them under your instructions. In my 15+ years advising clients, I’ve seen well-drafted trusts fail to deliver because they were never funded. This guide explains the steps, common pitfalls, tax and administrative issues, and action-ready checklists for the most common asset types. (This information is educational and not legal or tax advice; consult an estate attorney and tax advisor for personalized guidance.)
Why funding matters
A signed trust document only creates the vehicle; funding puts assets into it. Assets properly titled to a trust typically avoid probate, can make administration faster and less public, and help ensure your stated distribution and management rules are followed. Trusts can also be used for asset protection and tax planning, depending on the trust type. For basic tax and trust guidance, see the IRS pages on trusts and grantor trusts (IRS: https://www.irs.gov/).
Key preliminary steps (overview)
- Inventory your assets. Create a clear list with account numbers, titles, parcel IDs, and policy numbers.
- Identify the trust type and tax status. Revocable living trusts are usually grantor trusts for income tax purposes (the grantor pays taxes during life), while many irrevocable trusts have separate tax treatment and often need an EIN (IRS: apply for EIN — https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online).
- Talk to professionals. An estate planning attorney should review deeds, beneficiary language, and trust provisions. A tax advisor can advise on gift tax, basis step-up, and retirement account issues.
Step-by-step funding checklist
- Inventory each asset with current ownership and title information.
- Determine the proper transfer method for each asset type (deed change, account retitle, beneficiary designation).
- Get required documents: signed trust, trustee certification, EIN (if needed), and any state-specific forms.
- Complete transfer paperwork and record where applicable (e.g., county recorder for real property).
- Keep a dated copy of each recorded deed, account change form, and confirmation.
Funding real estate (most common and detailed)
How to do it
- Prepare a deed transferring the property from you (the owner) to you as trustee of the trust. Common deed language: “John A. Doe, as trustee of the John A. Doe Revocable Living Trust dated January 1, 2024.”
- Execute the deed per state law (notary and witness requirements vary by state).
- File the deed with the county recorder’s office where the property is located.
Key considerations
- Mortgage lenders may have a due-on-sale clause. Most lenders will not enforce this when transferring to a revocable living trust for estate planning, but confirm with the lender and your attorney.
- Update homeowner’s insurance and property tax records as needed.
- Some transfers may require documentary transfer tax filings depending on your county/state.
Bank and brokerage accounts
Options
- Retitle the account in the trust’s name (for revocable trusts this often uses your SSN as the trust is a grantor trust).
- Open a new account in the trust’s name and transfer assets into it.
- Use payable-on-death (POD) or transfer-on-death (TOD) designations where appropriate — note that beneficiary designations bypass probate but do not always give the trustee control during life.
Brokerage-specific tips
- Brokerages usually require a copy of the trust, trustee certification, and possibly an EIN for irrevocable trusts.
- Transfers between brokerages typically use the transfer agent or ACAT process; provide trust documentation early to avoid delays.
Retirement accounts and IRAs
Do not retitle your IRA or 401(k) into a trust while alive—this typically triggers distribution and tax consequences. Instead, name the trust as the beneficiary or designate individual beneficiaries and coordinate design language with your attorney and tax advisor.
- If you name a trust as beneficiary, make sure the trust’s terms allow for required minimum distributions and meet the SECURE Act rules (which changed how many beneficiaries must withdraw inherited IRAs) — consult a tax advisor (IRS: retirement plan and IRA guidance — https://www.irs.gov/retirement-plans).
Life insurance and annuities
- Change the beneficiary to the trust, or name beneficiaries directly depending on goals. If the trust is the owner or beneficiary, verify any insurable interest and the policy’s terms.
- If the policy is owned by a revocable trust, proceeds may be included in the taxable estate; an irrevocable life insurance trust (ILIT) is a common strategy to keep proceeds out of the estate.
Business interests, vehicles, and titled personal property
- LLC or partnership interests: update membership certificates or partnership schedules and amend operating agreements if necessary. Transfers can have tax and control consequences.
- Vehicles: state DMV typically requires a title transfer to the trust; some states allow transfer-on-death vehicle designations instead.
- Valuable personal property: use an assignment or schedule attached to the trust to identify items (avoid retitling every piece of jewelry or art unless required).
Digital assets and passwords
Include a secure password list or digital asset inventory and grant the trustee limited access instructions. Many states recognize the need to address digital property in estate plans.
Tax and reporting issues to watch for
- Grantor vs. non-grantor trust tax rules: Revocable trusts are generally treated as grantor trusts for income tax—grantor remains responsible for reporting. Irrevocable trusts may file separate returns and need an EIN (IRS resources on trusts and EINs: https://www.irs.gov/).
- Gift tax: transferring assets out of your individual ownership into certain irrevocable trusts may be treated as a completed gift and could require filing Form 709. Always confirm current exclusion amounts and rules with a tax advisor (IRS gift tax guidance: https://www.irs.gov/).
- Basis and step-up: property held in a revocable trust typically receives the same step-up in basis at death as property held individually; complex rules apply for irrevocable trusts.
Common funding mistakes and how to avoid them
- Creating a trust but not funding it. Action: use a checklist and complete transfers within months of signing.
- Retitling retirement accounts into a trust directly. Action: use beneficiary designations instead and consult your tax advisor.
- Vague beneficiary language in the trust when naming a trust as beneficiary on an account. Action: make sure the trust is draft to allow trustee to meet required distribution timelines and include a distribution standard (income, principal, or both).
- Not updating titles after major life events (marriage, divorce, sale of property). Action: review your trust and titles annually or with major financial changes.
Real-world examples (anonymized lessons from practice)
- A client with several rental properties recorded deeds into her revocable living trust, then provided the trustee with property management instructions and insurance updates. After her death, the successor trustee avoided probate and transferred management smoothly to the heirs.
- Another client named a revocable trust as beneficiary of an IRA without specific distribution language. The trustee faced distribution timing problems because the trust language did not meet SECURE Act beneficiary requirements. Lesson: coordinate beneficiary naming with trust drafting.
Quick funding checklist you can use today
- Gather trust document and trustee certification.
- List all assets and current titles.
- For real property: prepare and record deeds.
- For bank/brokerage: contact institutions for their trust-account requirements.
- For retirement accounts: set beneficiaries, don’t retitle.
- For life insurance: update policy beneficiary if appropriate.
- Save copies of records and confirmations in a secure location.
Links to related topics on FinHelp
- For help choosing between trust types and understanding their pros and cons, see our guide on Revocable vs Irrevocable Trusts: Pros and Cons (https://finhelp.io/glossary/revocable-vs-irrevocable-trusts-pros-and-cons/).
- For information on managing a trust after funding, including trustee duties and administration, see Trust Administration (https://finhelp.io/glossary/trust-administration/).
Final notes and professional disclaimer
Funding a trust is a legal and administrative process that requires precise steps for each asset type. In my practice I stress documentation and coordination: the trust document, account institutions, title companies, and your attorney must all align. This article is educational and does not replace personalized legal or tax advice. Contact a qualified estate planning attorney and CPA before making transfers that could have tax, creditor, or legal consequences.
Authoritative resources referenced: IRS (trusts and EIN guidance) — https://www.irs.gov/; Consumer Financial Protection Bureau (estate planning basics) — https://www.consumerfinance.gov/consumer-tools/estate-planning/; SECURE Act and retirement distribution guidance — https://www.irs.gov/retirement-plans.
If you’d like, I can convert the checklist into a printable step-by-step form or draft sample deed and retitling language for a revocable trust to share with your attorney.
