Signing a living trust is the start of the work, not the end of it. A trust can only manage the property it actually holds, and moving property into it has a name: funding the trust. A trust that was signed but never funded is the most common reason a carefully drafted plan fails to do its job, because everything left outside it has to be settled some other way, usually through the court. If you are still deciding whether a trust fits your family at all, start with our guide to choosing between a living trust and a will.
Funding is not one step. Each kind of asset moves in its own way, and a few should not move at all.
Your home and other California real estate. Real property moves into the trust by a new deed, signed by you as the current owner and naming you as trustee of your trust, then recorded with the recorder in the county where the property sits. The recorder will generally expect a Preliminary Change of Ownership Report with the deed. The good news for most families is on the tax side: California Revenue and Taxation Code section 62(d) says a transfer into a trust is not a change in ownership while the trust is revocable or while the person transferring is its present beneficiary, so moving your home into your own living trust does not by itself trigger a property tax reassessment. That rule is about your own revocable trust; what happens when the property later passes to children is a separate question, covered in our guide to Proposition 19 and family property.
Bank and brokerage accounts. These are retitled through the institution, usually on its own form, so the account is held by you as trustee. Most banks will ask to see a certification of trust, a short summary of the trust's key terms, rather than the full document. Some families choose a payable-on-death designation to the trust instead of retitling a particular account; either can work, and the right choice depends on the account and the institution.
Retirement accounts. IRAs, 401(k)s and similar accounts are the main exception. The account stays in your name. What changes is the beneficiary designation on the account's own form, which may name family members directly, the trust, or a mix. That form controls who inherits the account regardless of what the trust says, and the choice has real income tax consequences for the people who inherit it. Our guide to IRA beneficiary mistakes covers the traps.
Life insurance and annuities. Like retirement accounts, these pass by beneficiary designation. Naming the trust as beneficiary can make sense when the proceeds are meant for young children or for someone who should not receive a lump sum outright, because the trust can then hold and manage the money on the terms you chose.
Business interests. Membership interests in an LLC, or shares in a corporation, are usually moved by a written assignment to the trust, recorded in the company's own records. Before doing it, the company's operating agreement or bylaws have to be checked for transfer restrictions. S corporation shares need extra care, because a trust has to meet specific federal requirements to hold them; our guide on how a living trust can end an S corporation election explains why. For owners, funding the trust is often where estate planning for a family business becomes concrete.
Vehicles, household items and personal property. Furniture, jewelry, art and similar belongings are usually transferred by a general assignment signed with the trust. Vehicles are handled through the DMV's own process when retitling is worthwhile.
Property acquired later. Funding is not a one-time event. A home bought after the trust was signed, a new brokerage account, or an inheritance received years later all start outside the trust unless they are titled into it when acquired. A pour-over will acts as a backstop, directing anything left outside the trust into it, but property that reaches the trust only through the will may still have to pass through the court first. The backstop is there for what slips through, not as a plan.
Where this goes wrong. Most funding failures are quiet. A refinance where the lender asked for the home to come out of the trust and nobody put it back. An account opened at a new bank in an individual name. A second property bought in another state and never deeded over. None of these show up until the trust is needed, which is why a funding check belongs in every periodic trust review.
Funding is part of the work we do on every estate plan, not an extra left to the family afterward. If you have a trust and are not sure what it actually holds, a review starts with a simple list of what you own and how each item is titled today. The first conversation is free.
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This article is general information, not legal advice, and does not create an attorney-client relationship. Estate and business law change and depend on your specific situation. Speak with Donald W. Flaig before acting.