Living Trusts: Why Assets Must Be Retitled

Many people sign a living trust and assume their estate plan is finished. Often it is not. A living trust generally controls only the property it actually owns. If your home, bank accounts, and investments are still in your personal name, the trust may have little to manage when it is needed. Moving property into the trust is called funding the trust, and it is one of the most commonly missed steps in estate planning. This guide explains why it matters and how it usually works.

What a living trust is

A living trust, also called a revocable trust, is a legal arrangement you set up during your life. In a common setup:

• you create the trust and serve as the trustee, managing the property;
• you are also the main beneficiary during your life;
• you name a successor trustee to take over if you die or become unable to manage your affairs; and
• you name who receives the property after your death.

Because the trust is revocable, you can usually change or cancel it while you are able to.

People use living trusts for several reasons: to plan for incapacity, to provide privacy, and, in many cases, to help property pass without a full probate process. All of these benefits generally depend on the trust holding the property.

Why funding matters

A trust document is like an empty container. Signing it creates the container, but it does not fill it. Property titled in your own name at death generally does not pass under the trust. Instead, it may pass under your will, which may require probate, the very process many people hoped to avoid.

Many plans include a pour-over will. This type of will directs that property left outside the trust goes into the trust at death. It can act as a safety net, but property passing through a pour-over will may still need to go through probate first.

Funding also matters for incapacity. A successor trustee can generally manage only what the trust owns. If your accounts are in your personal name, someone may need a power of attorney or a court appointment to manage them.

How different assets are usually handled

The steps depend on the type of property and the institution involved. In general terms:

Real estate. A new deed is usually prepared and recorded with the county, transferring the property from you to the trust. Before you do this, it is wise to ask about mortgage terms, title insurance, property tax treatment, and any local transfer requirements. Property in another state may need to follow that state's rules.

Bank and brokerage accounts. The bank or brokerage firm usually has its own forms to change the account owner to the trust or to open a new account in the trust's name. Some people use a payable-on-death designation naming the trust instead, where the institution allows it.

Business interests. Ownership in a company may require an assignment and, sometimes, consent under the company's governing documents.

Vehicles and personal property. Some items are handled by assignment or left to pass under the will. Rules for vehicle titles are set by the state motor vehicle office.

Retirement accounts. These are usually not retitled into a trust during your life, because doing so can create tax problems. Instead, people often use beneficiary designations. Whether to name a trust as beneficiary is a tax-sensitive decision to discuss with a lawyer and a tax professional.

Life insurance. Ownership usually stays the same, but the trust may be named as beneficiary if that fits the plan.

A simple funding checklist

1. List your assets, with how each one is titled now.
2. Decide which assets belong in the trust and which should use beneficiary designations.
3. Contact each institution for its process and forms.
4. Record new deeds for real estate, where appropriate.
5. Keep proof of each change, such as recorded deeds and account statements.
6. Update after new purchases. New accounts or property bought later may need to be titled in the trust too.
7. Review every few years and after major life events.

Common gaps

Funding problems often show up only after a death or illness, when they are harder to fix. Watch for:

• a home bought after the trust was signed but titled in a personal name;
• a new bank account opened without thinking about the trust;
• an inheritance received into a personal account;
• property in another state that was never transferred; and
• beneficiary forms that conflict with the trust plan.

What happens if something was left out

If property is outside the trust at death, the family may need to use probate or a simpler state procedure, depending on the type and value of the property and state law. A probate or estate planning lawyer can explain the options. USAGov's courts page explains the different levels of courts, and probate is generally handled by a state or county court.

Getting help

Many estate planning lawyers help with funding, not just drafting. Ask at the start whether funding is included in the fee and who will prepare deeds and contact institutions. Our estate planning practice page explains more about this area. If cost is a concern, USAGov's legal aid page lists free and low-cost help.

Frequently asked questions

Does signing a living trust avoid probate by itself?

Generally, no. The trust usually controls only property it owns. Unfunded property may still need probate.

Should I put my retirement account into my trust?

Usually not during your life, because of tax issues. Ask a lawyer and a tax professional about beneficiary designations instead.

Do I lose control of my property when it is in a revocable trust?

In a common setup, you are the trustee and can manage and change the trust while you are able. Your documents control the details.

What is a pour-over will?

It is a will that directs property left outside the trust into the trust at death. It is a safety net, but that property may still go through probate.

Related: Browse guides on legal topics.

This page is general information, not legal advice. Laws change and every case is different — talk to a licensed attorney about your situation.