TL;DR

Creating a trust document isn’t enough; you must complete the process of funding a living trust for it to work. This means you have to formally transfer assets to the trust. An unfunded trust generally will not control any assets that have not been properly transferred to it and, in most cases, will fail to avoid probate. However, certain exceptions may apply under California law. The essential question of what assets go in a trust includes your house, bank accounts, and investments. The process of retitling assets in California, especially real estate, requires creating and recording a new deed.

How to Fund a Trust in California: A Step-by-Step Guide to Retitling Your Assets

It’s a scenario that plays out in hushed attorneys’ offices far too often. A family, grieving the loss of a parent, discovers the living trust they meticulously created is nothing more than an empty folder. The document itself is beautifully drafted, signed, and notarized. It outlines their parent’s wishes with perfect clarity.

However, it holds no legal power over the assets it was meant to control. The house, the bank accounts, the investments—none of it is actually in the trust.

Consequently, the family is now facing the one thing the trust was designed to avoid: a lengthy and expensive public battle in probate court. This heartbreaking outcome stems from the single most common failure in do-it-yourself estate planning: the failure of funding a living trust.

What Does ‘Funding a Trust’ Actually Mean?

Many people believe that creating and signing a trust is the final step. In reality, it’s only the beginning. An unfunded trust is like building a state-of-the-art vault but never putting your valuables inside. Vaults are only useful when they’re holding something.

The crucial next step is to legally transfer ownership of your property from your individual name to the name of your trust. This process is known as funding a living trust, and it’s what gives the document its power.

Without it, your assets are not governed by the trust’s terms upon your incapacitation or death. This means your wishes could be ignored, and your loved ones could be dragged through the California probate system. The entire purpose of your careful planning is defeated before it even begins.

The process of properly funding a living trust is detailed and critical to your estate plan’s success. With the current increased federal estate tax exemption scheduled to sunset at the end of 2025 (meaning the exemption amount will be significantly reduced starting in 2026), proactive legal guidance is more important than ever. The team at Bay Legal PC is here to advise you on the necessary steps for retitling your assets and help you avoid common and costly pitfalls. To discuss your specific situation and work towards securing your legacy, call us at (650) 668 800, email intake@baylegal.com, or schedule an appointment directly through our booking calendar.

How to Fund Your Trust: A Step-by-Step Guide

The core of how to fund a trust involves changing the title or ownership document for an asset from, for example, “Jane Smith” to “Jane Smith, Trustee of the Jane Smith Revocable Trust.” Each asset has its own unique procedure.

Real Estate (Your Home)

If you do not properly transfer your home to the trust, it will generally be subject to probate in California. Exceptions may apply in some cases. The process for retitling assets in California real estate is specific:

1. Prepare a New Deed: A new deed, often a Quitclaim Deed or a Grant Deed, must be drafted to transfer the property from you to your trust.
2. Record the Deed: This new deed must be signed, notarized, and officially recorded with the county recorder’s office where the property is located.
3. Notify Your Lender: While federal law generally prevents a lender from accelerating your loan due to this transfer, it’s good practice to inform them.

Ensuring this is done correctly is a cornerstone of funding a living trust. The stakes are simply too high to get it wrong, which is why many families turn to the experts at Bay Legal PC to handle the deed transfer and recording process.

Bank and Investment Accounts

Your liquid assets must also be moved into the trust. This is a critical step to allow your chosen successor trustee to access those funds to manage your affairs without court intervention.

• What to Do: Visit your bank or contact your brokerage firm.
• What to Bring: You’ll need a copy of your trust documents (or a certificate of trust).
• The Action: Complete the institution’s paperwork to change the account ownership from your individual name to the trust’s name. This might involve opening a new account.

Failing to transfer assets to a trust like your investment portfolio can lead to a messy and delayed distribution to your beneficiaries.

Other Valuables and Business Interests

When considering what assets go in a trust, don’t forget other important property.

• Personal Property: For items without a title (art, jewelry, collectibles), you can use a document called an “Assignment of Property” to formally transfer them to the trust.
• Business Interests: If you own a business, transferring your interest can be complex. You must review shareholder or partnership agreements for any restrictions. The process to transfer assets to a trust in this context often involves amending official business documents, a task where legal guidance from a firm like Bay Legal PC is not just helpful but essential.

What Goes in a Trust (and What Stays Out)?

A key part of learning how to fund a trust is knowing which assets to include and which to exclude.

Assets to Include in Your Trust:

• Real Estate: Primary residence, vacation homes, rental properties.
• Bank Accounts: Checking, savings, money market accounts, CDs.
• Non-Retirement Investment Accounts: Brokerage accounts with stocks, bonds, and mutual funds.
• Business Interests: Sole proprietorships, S-corp shares, LLC membership.
• Valuable Personal Property: Antiques, art, jewelry, intellectual property rights.

Assets to Keep OUT of Your Trust:

• Retirement Accounts (IRAs, 401(k)s, 403(b)s): These are transferred via beneficiary designations. Moving the account itself into your trust could trigger massive income taxes and penalties. Instead, you can name your trust as a beneficiary, but this requires careful planning.
• Health Savings Accounts (HSAs): These also pass by beneficiary designation.
• Vehicles (Sometimes): While you can transfer car titles to your trust, it can sometimes complicate insurance. California’s DMV offers a simpler transfer-on-death registration that avoids probate.

Navigating the complexities of trust funding can feel overwhelming, but you don’t have to do it alone. Achieving peace of mind starts with a clear plan. At Bay Legal PC, we strive to provide the legal guidance needed to properly transfer assets to your trust. We advise on the legal aspects of your estate plan and can collaborate with your existing financial and tax professionals to create a cohesive strategy, especially in light of the federal estate tax exemption changes scheduled for 2026. Take the first step toward confidence in your plan by calling (650) 668 800, emailing intake@baylegal.com, or using our booking calendar to set up a consultation.

The Dangers of an Unfunded Trust in California

The process of retitling assets in California is meticulous and requires organization, paperwork, and follow-through. Forgetting or failing to complete it properly has serious consequences.

• The Risk of Ending Up in Probate Court. Probate is the court-supervised process of distributing a person’s assets. It’s public record, can take one to two years (or more) in California, and can consume 3-7% of your estate’s value in fees. While certain small estates may qualify for simplified procedures, most estates of value that are left unfunded will require a formal probate process.
• You Lose Control. A judge, not your chosen successor trustee, will oversee the distribution of your assets. Your wishes for who gets what, and when, could be challenged or ignored.
• It Can Cause Family Conflict. When assets are not clearly owned by the trust, it creates confusion and can lead to arguments among your loved ones during an already difficult time.

The peace of mind that comes from knowing your trust is fully and correctly funded is immeasurable. It means you’ve locked the vault. It means your plan has the best chance to work as intended when your family needs it most. Because the process is so detailed, many people who create a trust on their own simply never complete this step, leaving their families vulnerable.

This is why professional guidance is so critical. An experienced estate planning attorney doesn’t just draft a document; they guide you through the entire funding process. At Bay Legal PC, we don’t just hand you a binder and wish you luck. We work with you step by step to help see that every intended asset is properly transferred and that your plan is complete.

But remember, a trust requires ongoing maintenance. Any new property, a new bank account, a refinanced home, must also be titled in the name of the trust. It’s an ongoing process, not a one-time task.

You’ve transferred your house, your bank accounts, and your investments. You’ve done the hard work. But in today’s digital world, what about the one asset you might not have a paper title for, the asset that could be your most valuable and is almost always forgotten?

Frequently Asked Questions (FAQs)

1. What does funding a living trust mean?

Funding a living trust is the process of legally transferring the ownership of your assets from your individual name to the name of your trust. Without this step, your trust is an empty shell that controls nothing.

2. Why is it so important to transfer assets to a trust?

You must transfer assets to the trust to help avoid probate court. If an asset is not formally owned by the trust, it is not governed by the trust’s terms and will likely have to go through the lengthy and costly probate process.

3. What are the basic steps on how to fund a trust?

The core steps on how to fund a trust involve identifying your assets, contacting the relevant financial institutions or county offices, and completing the necessary paperwork to change the title of each asset to the name of your trust.

4. What assets go in a trust typically?

The answer to what assets go in a trust generally includes significant property like real estate, bank and brokerage accounts, business interests, and valuable personal property that you want to pass to heirs outside of probate.

5. What assets should be kept out of a living trust?

Generally, you should not transfer retirement accounts like 401(k)s and IRAs into your trust, as this can trigger negative tax consequences. These assets are passed to heirs using beneficiary designations instead.

6. How does retitling assets in California work for real estate?

The process of retitling assets in California for a home involves preparing a new deed (like a Grant Deed), signing it with a notary, and recording it with the county recorder’s office where the property is located.

7. What happens if I forget to fund an asset?

Any asset that you forget to transfer into your trust will not be covered by its terms. It will be treated as part of your general estate and will almost certainly have to go through probate court.

8. Is funding a trust a one-time process?

No. After the initial funding a living trust, you must remember to title any new assets you acquire in the name of the trust to ensure they are included in your estate plan.

9. Can I fund a trust on my own?

While it is possible, the process is detailed and has legal consequences if done incorrectly. Consulting with a legal professional can help ensure every step is handled correctly, from titling documents to understanding complex assets.

10. Does properly funding my trust avoid probate?

In most cases, yes. This is the primary benefit. When you successfully transfer assets to the trust, those assets are no longer part of your ‘probate estate’ and can typically be managed and distributed by your successor trustee without court intervention.

A successful estate plan is a living strategy, not just a document. As laws evolve, including the significant reduction of the federal estate tax exemption scheduled for 2026, your plan needs a strategic review. Bay Legal PC works to provide the legal framework for your goals, advising on the detailed process of how to fund a trust and collaborating with your team of financial advisors to help align your efforts. Our firm’s practice is focused on estate planning and administration; we do not handle contested probate litigation. Any tax-related advice should be coordinated with your CPA or qualified tax professional. To begin a strategic conversation about your legacy, connect with our office by calling (650) 668 800, sending an email to intake@baylegal.com, or scheduling an appointment at your convenience with our online booking calendar.

Principal Office: L. A. Smith, Esq., Bay Legal PC, 667 Lytton Ave Suite 3, Palo Alto, CA 94301, United States. This information does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.

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This website and its contents are for informational purposes only and do not constitute legal advice. Prior results do not guarantee a similar outcome. Every estate planning matter is unique and depends on specific circumstances and applicable law. Viewing this site or contacting Bay Legal, PC does not create an attorney–client relationship. If you need legal advice, please schedule a consultation with a licensed attorney.