Creating a revocable trust is a powerful way to protect your assets, avoid probate, and ensure your estate plan works as intended. But signing the trust documents is only the first step. For your trust to function properly, it must be funded, which means transferring ownership of your assets into the trust.
One common area people overlook is investment accounts. In this article, we’ll break down why funding your trust is critical, how to retitle your investment accounts, and how a financial advisor can simplify the process.
Why Funding Your Revocable Trust Matters
Funding your trust ensures that your assets are controlled by the trust and distributed according to its terms after your death. If your trust is not funded, those assets may remain subject to probate, which can be time-consuming and expensive in Massachusetts.
For example, the Massachusetts Uniform Probate Code (MUPC) streamlines certain probate processes, but it’s still a public process that could result in delays, legal fees, and stress for your loved ones. Proper funding eliminates these concerns.
Additionally, a properly funded trust allows you to maintain control of your assets during your lifetime. You can serve as the trustee and retain full authority to manage, buy, or sell trust-owned assets.
Steps to Fund Investment Accounts into Your Trust
Transferring investment accounts into a revocable trust requires specific steps to ensure proper title changes. Here’s how to do it:
- Contact Your Financial Institution
Begin by reaching out to the broker or custodian managing your accounts. Let them know you’d like to retitle the accounts in the name of your revocable trust.
Pro Tip: Be prepared to provide key details, including the exact name of your trust. Even small errors, such as missing the word “Revocable,” can cause problems later.
- Complete Required Paperwork
Financial institutions often require you to fill out new account applications or transfer forms. These forms ensure the account titles are updated correctly.
You’ll also likely need to provide a copy of your Affidavit of Trust or Certification of Trust, which proves the existence of the trust and your authority as trustee. Most institutions do not require the full trust document.
- Verify the Title Change
Once the transfer is complete, review your next account statement. It should list the account holder as:
“[Your Name], Trustee of the [Trust Name] Revocable Trust, dated [Trust Date].”
If the title isn’t correct, contact the institution immediately to resolve any errors.
- Organize and Document the Change
After retitling the account, place a copy of the updated account statement in the “Trust Assets” section of your trust binder or portfolio. Maintaining clear records ensures your estate plan is well-organized and easy to manage.
How a Financial Advisor Can Help
Retitling investment accounts can feel overwhelming, but a financial advisor can simplify the process. Advisors are well-versed in working with financial institutions and can coordinate the paperwork, ensuring the title change is completed efficiently and accurately.
A financial advisor can also review your broader portfolio to identify other assets that should be transferred into the trust, such as cash accounts, life insurance policies, or real estate holdings.
Common Mistakes to Avoid
- Forgetting to Fund the Trust
Many people sign their trust documents and assume their estate plan is complete. Without funding, the trust doesn’t function as intended.
- Failing to Keep Beneficiary Designations Updated
While funding your trust, check that beneficiary designations on retirement accounts and life insurance policies align with your overall estate plan. In Massachusetts, beneficiary designations generally supersede the terms of a will or trust.
- Ignoring Smaller Accounts
Even small investment accounts should be retitled to avoid unnecessary probate proceedings. Don’t overlook minor assets when funding your trust.
- Inconsistent Titles
All account titles must match the trust’s legal name. Inconsistencies can create legal headaches for trustees and beneficiaries.
Massachusetts-Specific Considerations
Massachusetts has specific laws that affect estate planning and trust funding. Here are a few key points:
- Probate Avoidance: The MUPC simplifies probate for smaller estates, but trusts remain the most effective way to bypass probate altogether.
- Estate Taxes: Massachusetts has a $1 million estate tax exemption, far lower than the federal exemption. Funding a trust can help reduce or eliminate estate tax liability through advanced planning techniques. Learn more about Massachusetts estate taxes here.
- Homestead Protection: If you own real estate in Massachusetts, ensure your homestead protection aligns with your trust. Transferring real estate to your trust might impact this protection, so consult with your attorney.
The Role of Trust Funding in Long-Term Planning
Properly funding your trust is just one part of a successful estate plan. Regular reviews are essential to ensure your plan reflects your current wishes, financial situation, and any changes in the law.
In Massachusetts, where laws like the Massachusetts Uniform Trust Code (MUTC) govern the administration of trusts, working with experienced professionals is key. Attorneys and financial advisors can help you navigate complex legal and financial considerations.
Next Steps
Funding a revocable trust might seem complex, but the peace of mind it provides is worth the effort. It ensures your assets avoid probate, are distributed according to your wishes, and remain protected throughout your lifetime.
If you’re ready to fund your trust or need assistance reviewing your estate plan, contact Cote Law Group. We specialize in helping Massachusetts families protect what matters most.
For more detailed guidance on trust funding or Massachusetts estate planning laws, explore resources like the Massachusetts Uniform Probate Code or consult with a qualified estate planning attorney.
