The assets you own can be transferred to your chosen heirs or beneficiaries upon your death in one of several ways. If the particular asset is owned by you and someone else, such as a residence you own jointly with your spouse with survivorship (JWROS), the property will automatically pass to your spouse upon your death. Assets can also pass through a beneficiary designation, such as in a death transfer or a death payment account with your bank. A third possibility is that the property goes through the probate process, either in accordance with your will or (in the absence of a will) in accordance with intestate laws.
A fourth means of transferring ownership of your assets is through a trust agreement, such as a revocable living trust. This method offers a number of advantages as a component of choosing an estate plan. A well-designed trust agreement can be the vehicle by which your assets are transferred after your death. Additionally, the trust may include detailed instructions on how your designated successor trustee should manage your assets in the event that you are unable to manage them yourself. However, to take full advantage of the benefits of a trust, you must first deposit your assets in the trust.
When your estate planning attorney comes to financing your trust, he is talking about placing your assets in the trust. Let’s look at some basic principles related to this important, but often overlooked, aspect of creating a trust as the basis of your estate plan.
What is important to finance the trust?
A well-designed trust agreement is nothing more than an empty shell and of little or no value to you (the settlor) or your intended beneficiaries, unless you actually own your assets. If you die before placing your assets in the trust, those assets are likely to be subject to the probate process (unless they are held in JWROS or passed in accordance with beneficiary designations. However, assets that are renewed in your name of the trust will immediately be subject to the management and control of its chosen successor trustee.
Should I transfer all of my assets to my trust?
Not necessarily. It is true that many of your assets must be transferred as soon as the trust is created, including assets such as the following: your personal residence; stocks, bonds, and mutual funds that you own in your own name; checking / savings accounts and certificates of deposit; personal property and collectibles; business interests, such as shares in owned corporations, partnership interests, and membership interests in limited liability companies; and your intellectual property rights, such as patents, trademarks, and copyrights. An important aspect of establishing your trust should include a comprehensive review of all of your assets with your estate planning attorney to determine which of those assets should be transferred to the trust.
Why not transfer all my assets to the trust?
There are some categories of assets that should not be owned by your trust. For example, individual retirement accounts, pension plans, and 401k accounts should not be owned by your trust. A transfer from such retirement plans to your trust may well be viewed by the IRS as a taxable distribution of the entire account and thus trigger an unwanted tax liability for you. In general, you would do well to remember that estate planning with regard to retirement planning is a complex issue that you should discuss with your attorney.
If you own a second home, either as a rental property or as a vacation home, you should also carefully consider whether it is advisable to transfer that property to the trust. Is this property subject to a mortgage that includes a “maturity on transfer” clause? If so, your lender may consider a transfer of the property to your trust as a trigger for your obligation to repay the loan in full. Again, this is an area to discuss with your estate planner.
How do I transfer those assets that must be deposited in my trust?
The answer here is: it depends on the particular asset being transferred. You would transfer your residence to the trust by filing a waiver claim deed in the real estate records in the county in which the property is located. So, for example, if you are the sole owner of the real property, you (being the grantor) would transfer the property to “yourself as the trustee of the [name] Trust “, as the grantee. You should be careful not to simply title the property in the trust’s name. A transfer to the” John Doe Trust “may not be recognized as legally effective; instead, the transfer must be to” John Doe , Trustee, of the John Doe Trust under agreement dated January 1, 2001. “
Your checking accounts, savings accounts, and certificates of deposit can be transferred to your trust by requesting your bank to provide you with the appropriate signature cards, which will then need to be signed by the current trustees of your newly created trust.
Will I need new checks made out to the trust?
You most likely don’t have to do that. Changing the title of your checking account to the trust’s name should have no effect on the account holder’s name printed on their checks.
How do I transfer stocks and mutual funds that I own?
Assuming your stocks and mutual funds are held by your broker, you will need to instruct your broker to change the title of your personal accounts to the name of your trust. This may involve completing a new brokerage account application. Your broker may ask you to provide evidence of the existence of the trust, in which case you will need your attorney to draw up a certificate of trust to be signed by you as the settlor.
If you have original stock certificates for a publicly traded company, you may need to open a brokerage or investment account in the name of your trust and then deposit the original stock certificates with the brokerage or you may need to contact the agent designated transfer fee. by the corporation that issued the shares and follow their instructions to change the title of the shares to your trust.
What if I have interests in a partnership or limited liability company (LLC)?
You must transfer the interest of your partnership or LLC membership to your trust by means of a written assignment of interest signed by you and acknowledged by the managing partner or managing member of the LLC. You should first review the operating agreement of the governing company / LLC to ensure that the agreement does not preclude such a transfer.
Do I need to title my car and RV in the trust’s name?
Although you can transfer the title of your personal vehicle (s) and / or RV (s) to your trust, it may be preferable not to do so. If you are in a car accident, the fact that your vehicle is titled in the name of your trust can make the injured party believe you have a lot of money, which encourages a lawsuit. We recommend that you separate a high-risk asset (such as your vehicle) from your lower-risk assets.
In short, using a revocable living trust as the basis of your estate plan will allow your assets to be distributed after your death without going through the probate process. Having a trust will also allow your chosen successor trustee to manage your property while you are disabled, thus avoiding the need for a costly court-administered guardianship or conservatorship process. However, to fully reap the benefits of a trust, you must properly fund your trust. We recommend that you use the above guidelines as the basis for a comprehensive review of your assets and a discussion with your estate planning attorney.
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