Transferring Investment Accounts To Your Trust

One of the main reasons to create a revocable living trust is to help your beneficiaries avoid probate when you pass away. In order to alleviate this burden from your loved ones, you must transfer ownership or “retitle” your investment accounts and other assets to your trust during your lifetime. 

So how exactly do you transfer assets into a trust? Let’s find out.

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What is a revocable living trust?

A revocable living trust is a valuable estate planning tool that allows you to specify your final wishes for your assets, such as real estate, bank and investment accounts, and personal possessions. 

Benefits of a revocable living trust include:

• Avoids probate: One of the key advantages of a trust is it helps your estate avoid probate so your heirs can receive their inheritance faster.

• Flexibility and control: Unlike an irrevocable trust, you retain control over your revocable living trust assets. Therefore, it’s easy to make changes if family dynamics change.

• Privacy: If you don’t create a trust, your estate will need to go through probate, a public process. Many people prefer to keep personal matters out of the public eye, so they create a trust to keep things private.

• Eliminates conflict: Creating a trust makes it harder for people to challenge your estate once you pass away. If your final wishes for your assets are clearly stated in your trust documents, you limit the possibility of conflict among family members.

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Importance of transferring assets into your trust

Assets owned by your trust when you die can be distributed outside of court proceedings, helping to ensure a smooth estate settlement for your heirs.

Once you’ve created a trust, you have to retitle your assets into the trust’s name. When you put assets into a revocable living trust, you retain control over them, but ownership is transferred to the trust. 

Assets in your name (versus the trust’s name) must go through probate at the time of your death, causing additional delays and expenses in your estate settlement.

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Can you put investments in a trust?

Yes, you can. Types of assets you can transfer into a trust include:

• Real estate
• Bank accounts (checking and savings)
• Certificates of deposit (CDs)
• Non-retirement investment accounts
• Stock and bond certificates
• Nonqualified annuities
• Vehicles
• Boats
• Personal property (jewelry, furniture, clothing, artwork, collectibles, etc.)
• Business interests
• Safe-deposit box

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What can’t be transferred into a trust?

Though many assets can be transferred into a trust, some cannot, such as:

• Retirement accounts: 401(k)s, 403(b)s, IRAs, qualified annuities, etc.
• Life insurance policies
• Health savings accounts (HSAs) 
• Medical savings accounts (MSAs)
• Uniform transfer to minors accounts (UTMAs)
• Uniform gifts to minors accounts (UGMAs)

When in doubt regarding the assets allowed into your trust, it’s always best to consult a professional, as rules can vary by state.

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How to transfer assets to a trust

The process of retitling assets to your trust varies by the financial institution. Here are some tips on transferring different types of assets into your trust.  

Real estate

To transfer ownership of your home, you will need a new deed that reflects the name of the trust versus your own. Then, you must notarize and record the new deed with the county registry. 

Investment accounts

Do you own investments such as stocks, bonds, and mutual funds in a brokerage account? If so, you can transfer the account from your name into that of the trust or open a new brokerage account in the trust’s name.

What you’ll need:

• Certification of trust document: A legal document that verifies the existence of your trust. 

• Letter of instruction: Details your intentions to transfer the brokerage account out of your name and into the name of the trust.

• Trust application: Your financial institution might require you to submit a trust application along with the certificate of trust and instruction letter. 

Once you submit your request, be sure to get written confirmation once your accounts are retitled in your trust’s name.

Bank accounts

Your bank will likely need a copy of your trust certificate and a letter of instruction to transfer accounts to your trust. Each bank has its own set of requirements, so it’s best to call to confirm what is needed. 

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Summary of key points

Certain assets, such as retirement accounts, can bypass probate even if they are in your name when you pass away. Retirement accounts are transferred directly to the beneficiaries you have on file with your financial institution.

In some circumstances (for example, if you have minor children), it may be best to name your trust as the beneficiary of your retirement accounts. That way, your trustee can manage the assets until your children are old enough to manage their inheritance responsibly. 

Brokerage accounts in your name will likely go through probate when you die. To avoid probate on brokerage accounts, you must create a trust or fill out a TOD (transfer on death) form to transfer the money directly to your beneficiaries. 

It is generally better to retitle your investment accounts to your trust during your lifetime rather than rely on a TOD to transfer your accounts at death. That way, if you become incapacitated during your lifetime, your successor trustee can step in and handle your trust accounts.

If your trust provides for an extended payout period after your death, it would be better to retitle your brokerage accounts to your trust during your lifetime to ensure that the extended payout would apply to your trust beneficiaries after you pass away.

If you have a financial advisor, they can assist you in re-titling your investment accounts into your trust.

If you have investment accounts but do not have a financial advisor, simply follow your financial institution's instructions for those wishing to transfer assets into a trust.

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The bottom line

Creating a trust is one of the best ways to ensure a smooth estate settlement for your heirs — as long as you retitle your assets. If you open a trust and don’t transfer ownership of your assets, you risk your estate getting tied up in probate. 

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Create an estate plan online with MyAdvocate

Before you can reap the benefits of a trust, you have to create one. With MyAdvocate, it’s easy to create essential estate planning documents like wills, power of attorneys, and trusts — all from the comfort of your own home.