Funding Your Revocable Living Trust in California: Transferring Assets Correctly

Creating a revocable living trust is a foundational step in developing a comprehensive estate plan. Many people feel a sense of accomplishment once the documents are signed, believing their work is done. However, the most vital action—the one that gives the trust its power—is yet to come. An unfunded trust is like building a secure vault but leaving all your valuables outside. The structure is there, but it protects nothing. To ensure your trust works as intended to avoid probate, manage your assets in case of incapacity, and provide for your heirs, you must “fund” it by transferring your assets into it.

This process of funding can seem daunting, involving different procedures for various types of assets.

What Does “Funding a Trust” Actually Mean?

Funding a trust is the process of legally transferring ownership of your assets from your individual name to the name of your trust. Once the trust is funded, the trust owns the assets, and you, as the trustee, manage them for your own benefit during your lifetime.

Think of your trust as a basket that you have created to hold your property. For the basket to be effective, you must physically place your assets inside it. If you create the basket but leave everything on the floor, it serves no purpose. Similarly, if you sign a trust document but never change the legal title on your accounts and property, the trust remains an empty vessel, unable to fulfill its functions.

When you fund your trust, you are changing the title on your assets from, for example, “Jane Smith” to “Jane Smith, Trustee of the Smith Family Revocable Trust dated January 1, 2025.” You still have complete control over the assets, with the ability to buy, sell, or refinance just as you did before. The only difference is that you are now acting in your capacity as the trustee.

Why Is Properly Funding Your Trust So Important?

Taking the time to fund your trust is essential for achieving the primary goals of creating one in the first place. The consequences of failing to do so can undermine your entire estate plan.

Probate Avoidance: This is the most common reason people create a living trust. Probate is the court-supervised process of distributing a deceased person’s assets. In California, probate can be a lengthy, expensive, and public process. Any assets not titled in the name of your trust (or that do not pass by beneficiary designation) will likely be subject to probate, even if you have a trust. A properly funded trust ensures these assets bypass probate, allowing for a faster, more private, and less costly administration.
Incapacity Planning: A living trust is also a powerful tool for managing your affairs if you become incapacitated and unable to make decisions for yourself. When your assets are in a trust, your designated successor trustee can step in immediately to manage those assets on your behalf without court intervention. If assets remain outside the trust, your family may have to go to court to establish a conservatorship, which is a complex and often stressful legal proceeding.
Privacy: Probate proceedings are a matter of public record. Anyone can access information about your assets, their value, your debts, and who your beneficiaries are. A trust administration, on the other hand, is a private affair handled between your successor trustee and your beneficiaries. Funding your trust keeps your financial matters confidential.
Seamless Transition: When your trust is fully funded, the transfer of your assets to your beneficiaries upon your death is seamless. Your successor trustee can manage and distribute the assets according to your instructions without unnecessary delays or court interference.

A Step-by-Step Guide to Funding Common Asset Types

The specific actions required to fund your trust will depend on the type of asset being transferred. It is important to follow the correct procedure for each category of property.

Here is a breakdown of how to transfer common types of assets into your California trust:

Real Estate

Any real property you own, including your primary residence, vacation homes, or rental properties, must be retitled in the name of your trust.

Process: To transfer California real estate, a new deed must be prepared. This is typically a Grant Deed or a Quitclaim Deed. The deed transfers the property from you as an individual to you as the trustee of your trust. The deed must be signed, notarized, and then recorded in the county recorder’s office where the property is located.
Property Taxes: In California, a transfer of real property into a revocable living trust for your own benefit generally does not trigger a reassessment for property tax purposes under Proposition 13. However, it is important to file the correct exemption forms with the county assessor.
Title Insurance: You should also contact your title insurance company to update your policy to reflect the change in ownership to the trust.

Bank and Credit Union Accounts

This includes checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs).

Process: Contact your bank or credit union and inform them you want to title your account in the name of your trust. They will likely require a copy of your Certificate of Trust, which is a short document that proves the trust’s existence and identifies you as the trustee. You will need to complete new signature cards to title the account in the name of the trust.
Payable-on-Death (POD) vs. Trust Titling: Some people name the trust as a POD beneficiary instead of retitling the account. While this avoids probate, it does not provide for incapacity planning. If you become incapacitated, a POD designation is ineffective, and your family may need a conservatorship to access the funds. Titling the account in the trust’s name provides for both probate avoidance and incapacity management.

Investment and Brokerage Accounts

These are non-retirement accounts that hold stocks, bonds, and mutual funds.

Process: The procedure is similar to that for bank accounts. Contact your financial advisor or the brokerage firm and request the necessary forms to transfer the account into your trust. You will need to provide a Certificate of Trust. The institution will retitle the account in the name of the trust, and future statements will reflect this change.

Tangible Personal Property

This is a broad category that includes items that do not have a formal title document, such as furniture, clothing, jewelry, artwork, and collectibles.

Process: For these assets, you use a legal document called an “Assignment of Personal Property.” This document states that you are transferring all of your tangible personal property to your trust. It is a general assignment that covers all such items without needing to list each one individually. This document should be signed, notarized, and kept with your trust records.

Business Interests

Funding your trust with an interest in a closely-held corporation, Limited Liability Company (LLC), or partnership requires careful handling.

LLC and Partnership Interests: Review the company’s operating agreement or partnership agreement for any restrictions on transferring ownership. You will need to execute an “Assignment of Interest” document to formally transfer your ownership from yourself to your trust.
Corporate Stock: For a private corporation, the stock certificates must be reissued in the name of the trust. If it is an S-Corporation, it is important to ensure the trust is drafted in a way that is permitted to hold S-Corp shares to avoid negative tax consequences.

Life Insurance and Retirement Accounts: A Special Case

These assets are handled differently. You do not change the ownership of these accounts to your trust. Instead, you update the beneficiary designations.

Process: Contact the life insurance company or the retirement account custodian (e.g., Fidelity, Vanguard) and request their change of beneficiary form. You can name your trust as the primary or contingent (secondary) beneficiary.
Retirement Accounts (IRAs, 401(k)s, 403(b)s): Naming a trust as a beneficiary of a retirement account has complex tax implications. Doing so can affect the ability of your beneficiaries to “stretch” distributions over their lifetimes. It is important to discuss this strategy with an attorney and a financial advisor to determine if it is the right choice for your plan. In many cases, naming individuals directly may be more tax-advantageous.

What Assets Should Generally Stay Out of Your Trust?

Not every asset should be placed in a revocable living trust. Some are better left outside or handled through beneficiary designations.

Retirement Accounts: As mentioned, transferring ownership of an IRA or 401(k) to your trust during your lifetime would be treated as a full withdrawal, triggering significant income taxes. These assets should only name the trust as a beneficiary, not an owner.
Motor Vehicles: While you can transfer the title of cars, boats, and RVs to your trust, it is often more trouble than it is worth. It can sometimes complicate insurance coverage and the process of selling the vehicle. In California, vehicles can often be transferred after death with a simplified process through the DMV, avoiding formal probate.
Professional Practices: The stock of certain professional corporations may be legally required to be held only by licensed members of that profession.

Common Mistakes to Avoid When Funding Your Trust

Properly funding a trust requires attention to detail. Several common mistakes can derail an otherwise well-drafted plan.

Forgetting to Fund It: The most common mistake is creating the trust and then failing to take the next step of retitling assets.
Missing New Assets: After your trust is funded, you may acquire new assets. It is important to title these new assets in the name of the trust as you acquire them.
Incorrect Titling: Simple errors in the name of the trust on a deed or account can cause significant problems. The title must be exact.
Overlooking Beneficiary Designations: Failing to update beneficiary designations for life insurance and retirement accounts can lead to those assets going to unintended people, such as an ex-spouse.
The “DIY” Approach to Complex Assets: Attempting to transfer real estate or business interests without professional guidance can lead to invalid transfers, tax problems, or other costly errors.

Do I Need a Lawyer to Fund My Trust?

While you can handle some simple transfers yourself, such as changing the name on a bank account, professional guidance is invaluable for most of the funding process. An attorney can ensure that:

Deeds for real estate are drafted, executed, and recorded correctly.
Transfers of business interests comply with operating agreements and tax laws.
Beneficiary designations are coordinated with the overall goals of your estate plan.
All steps are documented properly, leaving a clear record for your successor trustee.

Investing in professional assistance to fund your trust correctly provides peace of mind and helps you avoid costly errors that could burden your loved ones in the future.

Structure Your Estate for Success

The creation of a revocable living trust is a powerful first step toward managing your legacy. But the process is only complete when the trust is fully funded. By diligently transferring your assets into your trust, you empower it to work for you and your family, ensuring your financial affairs are handled privately and efficiently according to your exact wishes. This final, decisive action is what truly brings your estate plan to life.

Whether you are just starting the estate planning process or need to review an existing trust, securing knowledgeable legal guidance is a key component of a successful strategy. The attorneys at Garmo & Garmo are prepared to help you evaluate your options, draft the necessary documents, and navigate the intricate landscape of funding your trust in California. Contact us at (619) 441-2500 for a consultation to discuss your specific needs and ensure your estate plan is structured for lasting success.