How to Add Property to Your Living Trust

General Paperwork
Property Without Document of Title
Property With Document of Title
Real Estate
Bank and Brokerage Accounts, Mutual Funds
Vehicles, Boats and Planes
Interests in Businesses

General Paperwork

Before a living trust can unfold its purpose the trust needs to be funded with property. It is important to know that the setup of a living trust alone is not sufficient. In addition the property that you want to have in the trust has to be transferred to it.

The funding usually involves some extra paperwork. It is essential to do it correctly. If the transfer of property is not administered in the right way the living trust might end up to be totally useless. If you leave the drafting of your living trust document to a lawyer he will usually prepare the necessary paperwork for the required property transfer along with the living trust document.

Generally every single that is on the property schedule has to be transferred to the trust.

Property Without Document of Title

Goods of daily use, such as clothing, furniture, electronics, household goods, books and so on, don’t have a document of title, that would show the ownership status of the respective good. For these goods the act of transfer to the trust is fairly simple. The respective assets just need to be listed in the property schedule of the trust.
 
As a San Francisco trust attorney I usually advise my clients to sign a written notice of assignment additionally in order to create written proof of the transfer. A notice of assignment is a short paper with a declaration that the right, title and interest of a certain piece of property or of several items are assigned and transferred to another person. Such a declaration must contain the names of the assignor (the person who owns the respective property) and the assignee (the person who receives the property, in this context the trustee for the living trust) as well as the respective property. It should also contain the date and place of the signing.

Property With Document of Title

Property for which there is a document of title needs to be transferred in a more formal way depending on the type of property. Therefore it is even more important to conduct the transfer after the declaration of trust has been signed. To make it absolutely clear: it is not enough to include such assets in the property schedule (like property without document of title), they have to be transferred separately.

Real Estate

Real estate is the prime asset, which comes with a document of title. In order to transfer e.g. a house to the trust a deed must be prepared that lists the trustee or the trustees as the new owners (One exemption is property in Colorado, because statute law encourages to transfer the property directly to the trust itself).

A deed is a legal instrument in writing used to grant a right. Common deeds in California are so called “grant deeds” (outside California called “warranty deed”), which transfer title outright and so called “quitclaim deeds”, which transfer any claim or potential claim the grantor has on the property without a warranty. As a San Francisco trust attorney I usually consult my clients to use a grant deed. However there might be specific situations where a quitclaim deed might be preferable. The deed that is right for you, has to be determined according to the particular facts and circumstances at issue, but for most cases a grant deed will do the job.

Deed forms can be downloaded for free from several websites, e.g. the Sacramento Public Law Library. The form requires
  • the date
  • the currents owner’s name(s)
  • the new owner’s name(s)
  • the legal description of the property
The legal description of the property can be taken from the previous deed, that was used to acquire the property. Often this particular description is preceded by the common description of the property, e.g. by its postal address.

The deed must then be notarized and recorded (that means to be filed) with the local county recorder/clerk (in San Francisco the office is identical with the Assessor’s Office). A preliminary change of ownership form has to be filed along with the deed. The form is usually available through the website of the particular county recorder’s office. However the transfer of real estate to a living trust does not trigger a reassessment of the property’s value for tax purposes in California.

Bank and Brokerage Accounts, Mutual Funds

In order to transfer a bank or a brokerage account to the trust it must simply be reregistered in the name of the trustee. Most banks are familiar with the procedure and will offer the necessary papers to sign. Sometimes a Certification of Trust, which I already discussed above, has to be presented to the bank or brokerage firm.

The very same applies to mutual funds and most other investment. The grantor has to communicate with the issuing company in order to reregister the respective fund in the name of the trustee.

Vehicles, Boats and Planes

As mentioned above, vehicles boats and planes generally require special forms in order to be reregistered in the trustee’s name. Sometimes the title certificate contains the necessary instructions how to do it. In other cases you will need to contact the respective registration agency. Quite often useful information can be found on the respective websites.

Interests in Businesses

The transfer of businesses to your trust is relatively easy if you’re the sole owner of the business and of all its assets (sole proprietorship). In this case you can simply transfer all the business assets (e.g. a shop) to the living trust. It is important not to forget to put the business’s name on the trust’s property schedule in order to transfer the intangibles such as customers’ goodwill to the trust.

More care has to be taken if you operate your business in a partnership. Usually the respective shares can be as easily transferred to the living trust as it would be with sole property. However the partnership agreement might include a restrictive clause, that prohibits the transfer of partnership shares for certain reasons or grants the other partners the right to acquire the deceased partner’s share upon his death. In those cases a trust law firm, which has also business law experience like Rinne Legal in San Francisco, should be consulted to find an individual solution.

If your business is organized as a corporation, e.g. as a limited liability company, the according articles of association and the respective corporate law have to be taken into account as well. Normally the interest in a corporation can be transferred to a living trust without major trouble. However to be sure a thorough check of the corporations bylaws, articles of incorporation and shareholder agreements has to be conducted. In some instances it can be necessary to initiate the change of some rules to ensure, that the trustee keeps his voting rights in the shareholder assembly. Again in most cases the help of an experienced attorney is required.