Trusts offer an efficient means of asset transfer post-death, but simply establishing a trust is insufficient—it must also be properly "funded." Failure to fund a trust can led to costly probate proceedings.
"Funding a trust" alters asset ownership, with the trustee of a revocable trust assuming ownership instead of merely holding the asset in name. The method of funding varies depending on the asset type.
Real Property: California real property ownership is changed through deed transfer. Deeds transferring property to a trust trustee are recorded with the county recorder.
Bank, Broker, and Stock Accounts: Ownership of these accounts shifts from individual to trust ownership. Banks and brokers are notified, with the trust or a "certificate of trust" summarizing key terms provided.
Retirement Accounts: Designated beneficiaries are crucial for funding retirement plans, avoiding naming the trust directly. Forms are provided by plan administrators for beneficiary designation, typically prioritizing non-owning spouses and alternative beneficiaries such as children or relatives.
Life Insurance Policies: Designated beneficiaries, whether individuals or trusts, are named to receive life insurance proceeds. Insurers provide forms for beneficiary designation, often favoring trusts as primary beneficiaries.
In summary, trusts facilitate asset transfer post-death with minimal hassle, but proper funding is essential. Unfunded trusts risk probate, a costly oversight to avoid.
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