Creating a revocable living trust is one of the most valuable estate planning steps a Severance Colorado family can take. It allows assets to pass to beneficiaries without probate, keeps the estate private, and provides a management structure if the grantor becomes incapacitated. But there’s a step that many people miss after the trust document is signed, and it’s the step that determines whether the trust actually accomplishes any of those goals.
That step is funding. A trust document that isn’t funded with assets is a legal structure with nothing inside it. Assets that aren’t retitled into the trust will go through probate regardless of what the trust document says. For Severance residents who went through the effort of creating a trust, failing to fund it properly is one of the most common and most costly estate planning oversights.
What Funding a Trust Actually Means
Funding a revocable trust means changing the legal ownership of your assets from yourself as an individual to yourself as trustee of the trust. The trust document itself doesn’t transfer anything. It creates the structure. The actual transfers happen through separate legal steps for each category of asset.
Real estate is transferred by executing and recording a new deed that conveys the property from you individually to you as trustee of your revocable trust. In Colorado, this is typically done with a quit claim or warranty deed that specifically identifies the trust by name and date. Once recorded with the Weld County Clerk and Recorder, the property is held in the trust and will pass to your successor trustee without probate.
Bank accounts are retitled by contacting the financial institution and requesting the account be changed to trust ownership. Most banks have their own forms for this process. Some institutions require a copy of the trust document or a certification of trust before making the change.
Investment and brokerage accounts are retitled through the brokerage firm. The process is similar to bank accounts, though some firms have specific requirements for how the trust is named on the account.
Retirement accounts and life insurance are generally not transferred into the trust itself. These assets pass by beneficiary designation, which supersedes both a will and a trust. Retitling a traditional IRA into a trust can trigger adverse tax consequences. Instead, beneficiary designations on these accounts should be reviewed and coordinated with the overall estate plan, which may include naming the trust as a contingent beneficiary in some circumstances.
Personal property including vehicles, jewelry, art, and other items without formal title documents can be transferred through a general assignment of personal property, a document that assigns ownership of specified personal items to the trust.
What Happens to Assets Not Transferred Into the Trust
Assets that remain in your individual name when you die go through Colorado probate regardless of what your trust document says. This is why most trust-based estate plans include a pour-over will. A pour-over will directs that any assets outside the trust at death be transferred into the trust through probate and then distributed under the trust’s terms.
The pour-over will works, but it requires probate for those assets, which is exactly what the trust was designed to avoid. The goal is for as many assets as possible to be inside the trust before death so the pour-over will has little or nothing to process.
W.B. Moore Law works with Severance and Northern Colorado residents on trust creation and trust funding as a coordinated process, not as separate steps. Attorney William Moore is available for consultations after normal business hours and by Zoom to accommodate working families. If you’ve created a revocable trust but aren’t certain it was properly funded, reach out to a Severance revocable trust lawyer to review what’s inside the trust and what may still need to be transferred.