Funding your living trust
Signing the trust is the easy half. A trust only controls what has been put into it; and this is the step families most often leave undone.
"Funding" means changing the ownership of your assets so the trust, rather than you personally, holds them; or, for accounts that cannot be retitled, naming the trust as beneficiary. Until that happens, the trust is a well-written set of instructions attached to nothing.
What an unfunded trust looks like in practice
What goes in, what stays out
| Asset | Usual approach |
|---|---|
| Michigan home, rental, land, cottage | New deed transferring title to the trust |
| Out-of-state real estate | Deed prepared under that state's law; this is where a trust saves a second probate |
| Checking and savings | Retitle at the bank, or use payable-on-death naming the trust |
| Brokerage and non-retirement investments | Retitle into the trust with the custodian |
| 401(k), IRA, Roth | Do NOT retitle; keep individual, and review the beneficiary form |
| Life insurance and annuities | Usually beneficiary designation, sometimes to the trust |
| LLC or closely held business interests | Assignment of membership interest, plus an operating agreement check |
| Vehicles and boats | Often left out; Michigan has simplified transfer options |
| Household goods, jewelry, collections | Assignment of personal property, plus a personal property memorandum |
Retirement accounts are the important exception
Transferring an IRA or 401(k) into a trust during your lifetime is treated as a distribution and can trigger immediate income tax. Leave the account in your own name. Whether the trust should be the beneficiary is a separate, genuinely technical question , it can be the right call for a minor, a beneficiary with creditor problems, or a beneficiary receiving needs-based benefits, and the wrong call in many ordinary cases. Decide it with your attorney, not with the form on the custodian's website.
Step by step
- Deed the real estate. A deed transferring the property to the trustee is prepared and recorded with the county register of deeds. A property transfer affidavit is filed, and the transfer to your own revocable trust should not uncap the taxable value or disturb your principal residence exemption when handled correctly.
- Call each bank and brokerage. Ask for the form to retitle the account in the name of the trust. They will want the trust's date, the trustee names, and usually a certificate of trust rather than the whole document.
- Fix the beneficiary forms. Primary and contingent, on every retirement account and insurance policy.
- Assign the business interests. Check the operating agreement or shareholder agreement first; many restrict transfers and require consent.
- Sign the assignment of personal property so furniture, tools, jewelry and collections are covered without listing every item.
- Keep the pour-over will. It catches anything that was missed and sends it to the trust. It is a safety net, not a plan; anything it catches still goes through probate.
Use a certificate of trust, not the trust itself
A bank does not need to read who your children are or what they inherit. A certificate of trust proves the trust exists, names the trustee and confirms their authority, without disclosing the distribution terms. If an institution insists on the full document, ask for the certificate first.
Keeping it funded
Funding is not a one-time event. Every new account, every refinance, every property purchase is a chance to fall back out of the trust. Two habits prevent almost all of it: when you open anything new, ask "should this be in the trust or name it as beneficiary?", and when you refinance, confirm afterward whose name is on the recorded deed. Lenders routinely require the property to be taken out of the trust to close and do not always put it back.
- review the funding list once a year;
- re-check the deed after every refinance;
- review after a marriage, divorce, birth, death, move or business change;
- keep a single page listing what is in the trust and where it is held.
Have your funding reviewed
Attorney Badri Yono Jr. of Foster Swift Collins & Smith, P.C. reviews existing trusts as well as drafting new ones; including trusts signed elsewhere years ago that may never have been funded. A flat fee is quoted in writing before any work begins.
This article is general information about Michigan law, not legal advice, and does not create an attorney-client relationship. Tax consequences depend on your circumstances.
Talk with Attorney Badri Yono Jr.
Tell us about your family and we'll connect you directly with Attorney Badri Yono Jr. of Foster Swift; with a flat fee quoted in writing before any work begins.