A revocable living trust is like an empty box until you put assets in it. Lawyers call putting assets into the box "funding" the trust. Signing the trust is step one. Funding it is step two, and it is the step people most often skip or leave half done. Our ultimate guide to funding a revocable living trust covers every major asset type. This article goes deep on one of the most valuable: investment accounts.

Here is what happens if your brokerage account is still in your individual name:

• When you die, the account is not a trust asset. Unless it has a valid transfer on death (TOD) beneficiary, it passes under your will, and a will generally works only through probate. Arizona's small estate affidavit under A.R.S. §14-3971 lets heirs collect personal property without probate only when the total value of the decedent's personal property, less liens and encumbrances, is $200,000 or less. A single retirement-age brokerage account can blow through that limit.
• If you become mentally incapacitated, your successor trustee cannot manage an account the trust does not own. Your agent under a financial power of attorney may be able to act, but brokerage firms often scrutinize powers of attorney, ask for their own forms, or delay. If no one has clear authority, your family may need a court-appointed conservator.
• Your trust's instructions don't apply. The protections you paid for, such as holding an heir's inheritance in a lifetime beneficiary-controlled asset-protected trust, apply only to assets the trust owns or receives.

Not every account that holds stocks should be retitled. The rule of thumb: if you pay income tax on the account's dividends and gains every year (a "taxable" or "non-qualified" account), it usually belongs in your trust. If the account is tax-deferred or tax-free because of a federal retirement or savings law, it usually does not.

For a broader list of what stays out of a trust, read 8 Assets You Should Never Put in a Living Trust.

Many people delay funding because they fear losing control of their money. You won't. When you are the trustee of your own revocable trust, the only thing that changes is the name on the account. You still buy, sell, withdraw and close the account whenever you want.

Here is the before and after for a single person:

And for a married couple with a joint trust:

Use the exact trust name and date that appear in your trust document. Each firm formats the registration a little differently ("TTEE," "U/A dated," "UTD"), and that's fine as long as the trust and trustees are clearly identified.

What does not change:

• Your Social Security number. A revocable trust uses the trustmaker's Social Security number while he or she is alive. You do not need an EIN, and you do not file a separate trust income tax return.
• Your investments. Your stocks, bonds, ETFs and mutual funds move "in kind." Nothing is sold.
• Your income taxes. The transfer is not a sale or a gift. Dividends and gains continue to be reported on your Form 1040.
• Your cost basis. Your purchase prices and holding periods carry over to the trust account.
• Your control. As trustee, you make every decision. You can amend or revoke the trust at any time.

Step 1. Gather your trust information

You will need the exact name of the trust, the date it was signed, the names of the current trustees and successor trustees, and the Social Security number of each trustmaker. Most firms also want a certification of trust. Arizona law, A.R.S. §14-11013, allows a trustee to give a financial institution a short certification of trust instead of the entire trust document, so your beneficiaries and private instructions stay private. Learn more in our article Arizona Certification of Trust Keeps Your Estate Plan Private.

Step 2. Contact the brokerage firm and ask for the right form

Call your financial advisor or the firm's service line and say: "I want to change the registration of my account to my revocable living trust." Depending on the firm, you will receive a trust account application, a change of registration form, a change of ownership form, or a letter of authorization. Many firms let you start online.

Step 3. Understand whether the firm retitles the account or opens a new one

Some firms simply change the name on your existing account and keep the same account number. Others open a new trust account and move your holdings over with an internal "journal" transfer. Either method works. What matters is that the holdings move in kind and are not sold.

Step 4. Record your cost basis before anything moves

Download or print a cost basis (tax lot) report for every position. After the transfer, compare it to the new account. Errors are rare, but you want proof of your basis if one happens. If you use specific lot identification when you sell, confirm that setting carries over or reset it on the new account.

Step 5. Cancel open orders

If you have open limit orders or stop orders, cancel them before submitting the paperwork so nothing executes in the old account in the middle of the transfer. Re-enter them after the transfer is complete.

Step 6. Sign as trustee and get any required signature guarantee

Sign the forms exactly as the firm instructs, usually your name followed by "Trustee." If you need help, see our Trustee Signature FAQs. Some firms require a Medallion signature guarantee (a stamp from a bank, credit union or broker that guarantees your signature; a notary stamp is not a substitute). Many firms waive it when the Social Security number on the account is not changing, which is the case with a revocable trust, but each firm sets its own rules.

Step 7. Rebuild your account settings

If the firm opened a new trust account, settings from the old account may not follow. Check and reset:

• Dividend and capital gain reinvestment elections
• Cost basis method
• Linked bank accounts, automatic investments and automatic withdrawals
• Margin and options trading approval (a trust account often needs its own approval)
• Online access, paperless statements and trusted contact person
• Any old TOD beneficiary designation (it usually no longer applies once the trust owns the account, and your trust document now controls who inherits)

Step 8. Confirm the change and update your records

Don't assume the job is done because you mailed a form. Look at your next statement. The owner should show the trust registration. Then update your list of trust assets and keep a copy of the confirmation with your estate planning documents. Listing an account on a schedule attached to your trust is helpful, but it is not a substitute for actually changing the account registration.

Every firm has its own paperwork, and firms change their procedures often, so always confirm the current process with your firm. Here is the general pattern at the three firms our clients use most:

• Fidelity. Fidelity uses a trust account application plus its change of account registration form for brokerage accounts, and a separate change of ownership form for mutual-fund-only accounts. For a domestic trust, Fidelity asks for its own Certification of Trust form.
• Charles Schwab. Schwab's Schwab One Trust Account application lets you convert an existing Schwab account into a trust account and keep the same account number. Schwab charges no fee to open or maintain a trust account, and its online application is available for living trusts in which the grantors, current trustees and beneficiaries are the same people.
• Vanguard. Vanguard generally does not retitle an existing account. You open a new trust brokerage account and then move the holdings over in kind. A Medallion signature guarantee is generally not required when the Social Security number is not changing, such as when you are both the account owner and the trustee.

If your account is managed by a financial advisor at a firm like Merrill, Morgan Stanley, Edward Jones, Wells Fargo or a local registered investment advisor, give your advisor a copy of your certification of trust and ask the advisor's office to prepare the paperwork. Most advisors do this routinely.

Some people own stock that is not in any brokerage account. It may be an old paper certificate in a safe deposit box, or shares held electronically in "book-entry" (Direct Registration System) form or in a company's dividend reinvestment plan. These shares are recorded by the company's transfer agent, such as Computershare or Equiniti, not by a broker.

You have two choices:

• Re-register the shares with the transfer agent. Download the transfer agent's transfer request form for that company, complete the trust section with the trust's name, date and trustees, sign it, and get a Medallion signature guarantee. If you hold paper certificates, send the originals with the form. Some transfer agents now offer a Medallion waiver for small holdings, but most still require the stamp.
• Deposit the shares into your trust brokerage account. This is usually the better choice. Your broker can help you deposit certificates or move DRS shares into the trust account, which consolidates your holdings, simplifies your statements, and makes life far easier for your successor trustee.

Before mailing an original certificate, make a copy of the front and back and send it by a trackable method. Replacing a lost certificate can require an expensive indemnity bond.

Employer equity needs extra care because the rules come from your company's plan and from special tax rules.

• Unvested restricted stock units (RSUs) and unexercised options usually cannot be transferred at all. They stay in your name until they vest or you exercise them. Read your plan to see what happens to them at death, and whether you can name a beneficiary.
• Vested shares sitting in your stock plan account (at E*TRADE, Fidelity, Schwab, Morgan Stanley or another plan administrator) can usually be moved to your trust brokerage account in kind.
• Employee stock purchase plan (ESPP) shares and incentive stock option (ISO) shares may be subject to special holding periods. Before moving these shares, ask your plan administrator and your CPA whether the transfer could affect the shares' tax treatment. When in doubt, wait until the holding period ends.

If you own shares of a corporation that is not publicly traded, there is no broker to call. You transfer the shares with a written stock assignment (sometimes called a stock power), surrender the old certificate (if any), have the corporation issue a new certificate to you as trustee, and update the corporation's stock ledger.

Check these issues first:

• Transfer restrictions. The bylaws or a shareholder (buy-sell) agreement may require consent of the other shareholders or the board, or may limit transfers to permitted transferees. Most well-drafted agreements allow transfers to a shareholder's revocable trust, but read the document first.
• S corporation status. A revocable grantor trust is an eligible S corporation shareholder while the trustmaker is alive under IRC §1361(c)(2). After the trustmaker's death the trust generally remains eligible for two years, after which the shares must be distributed or held in a trust that makes a qualified subchapter S trust (QSST) or electing small business trust (ESBT) election. A mistake here can terminate the S election, so the trust should contain proper S corporation provisions.
• Professional corporations. Shares of a professional corporation (for example, a medical or dental practice) can generally be owned only by licensed professionals. Talk with us before transferring them.

If your business is an LLC rather than a corporation, the transfer is done with an assignment of membership interest and an amendment to the operating agreement. See Put Your Business in Your Estate Plan.

Never retitle an IRA, 401(k) or other retirement account

An IRA or employer retirement account must be owned by you individually. If you try to change the owner to your trust, the IRS treats it as if you withdrew the entire account. The whole balance of a traditional IRA or 401(k) could become taxable in one year, and you would lose future tax deferral. This is one of the most expensive estate planning mistakes a person can make.

Instead, you control who gets your retirement accounts with the custodian's beneficiary designation form. Whether you should name your spouse, your children, or your trust as beneficiary depends on your family, the size of the account, and the post-death distribution rules. Naming a trust can protect an heir's inheritance, but the trust must be drafted to work with the retirement account rules. We review every client's beneficiary designations as part of our estate plan.

Annuities

Changing the owner of an annuity can have unexpected income tax consequences and can change the contract's death benefit rules. For most clients, the right move is to leave ownership alone and review the beneficiary designation. Do not change the owner of an annuity without first talking with the insurance company and your estate planning attorney.

529 plans and HSAs

A 529 college savings plan is usually best handled by naming a successor account owner on the plan's forms. A health savings account (HSA) is like an IRA: it stays in your name, and you name a beneficiary.

Arizona's Uniform TOD Security Registration Act, beginning at A.R.S. §14-6301, allows you to keep a brokerage account in your own name and register it "transfer on death" to a beneficiary. That beneficiary can be your trust. When you die, the account passes to your trustee without probate.

Naming your trust as TOD beneficiary is better than nothing, and it is a useful backup. But retitling the account into the trust is usually the better choice because:

• A TOD designation does nothing if you become incapacitated. It works only at death. Your successor trustee cannot manage the account while you are alive but unable to act.
• TOD designations get lost. When you move money to a new firm or open a new account, the old designation does not follow automatically.
• Naming individuals instead of the trust can defeat your plan. If you name your children directly, their inheritance goes to them outright, unprotected from their creditors, divorces and bankruptcies, and a minor child's share may require a court-supervised conservatorship.

Learn more in Pay on Death Forms Can Avoid Probate for Accounts.

For a standard revocable living trust, there are none while you are alive. Because you can revoke the trust, it is a "grantor trust" under IRC §671 and IRC §676, and the IRS ignores it for income tax purposes. The IRS has long taken the position that a transfer between a person and his or her own grantor trust is not a sale, so moving appreciated stock into the trust creates no capital gain. The grantor trust reporting rules in Treas. Reg. §1.671-4 let the trust account report under your Social Security number, and the income goes on your personal return.

At death, investments owned by your revocable trust receive the same step-up in basis under IRC §1014 that they would receive if you owned them individually. Your heirs' basis generally becomes the value on the date of death, which can wipe out decades of built-in capital gain.

• Selling investments to "move" them. Never liquidate an account to fund a trust. Ask for an in-kind transfer. A sale can trigger capital gains tax for no reason.
• Retitling an IRA or 401(k). This can make the entire account taxable. Use beneficiary designations instead.
• Assuming the schedule of assets did the job. Listing an account on your trust's schedule is not the same as changing the account's registration. The firm's records control.
• Forgetting the small accounts. The forgotten account at a firm you no longer use, the dividend reinvestment plan from a former employer, and the paper certificate from Grandma are the assets most likely to end up in probate.
• Opening new accounts in your own name. After your trust is funded, open every new taxable investment account in the name of your trust from day one.
• Leaving out a spouse's separate account. Each spouse's individual accounts need to be moved, not just the joint account.
• Not updating after a move or a new firm. When you transfer to a new broker, make sure the receiving account is a trust account, not an individual account.

Even when an account slips through, your plan has a safety net. A pour-over will directs assets left in your name into your trust, but those assets may have to go through probate to get there unless they qualify for the small estate affidavit. The safety net is a backup, not a plan. To see why probate is worth avoiding, read Arizona Probate Costs Loved Ones Time, Money & Stress.