Funding Your Trust

The main ideas from this information are about funding your trust. Personal effects can be assigned to the trust through a certification of trust and an assignment of personal property. Vehicles can either be retitled into the trust or transferred upon death through a beneficiary designation. Bank accounts, broker accounts, retirement accounts, and life insurance policies should all be transferred to the trust. Houses can be deeded into the trust, and publicly traded stocks and bonds should have their titles changed to the name of the trust. Business interests should be transferred through written assignments or with the assistance of an attorney. Welcome to EstateCast, I'm Robert Newman. Our goal at EstateCast is to educate and inform you about estate planning and how it can give you and your loved ones peace of mind. Today's topic, funding your trust. Congratulations! You've just created an estate plan to help your family and your loved ones care for you if you become incapacitated and to help them transition after your death with the least administrative burden possible. A living trust is a great way to make sure your assets are not tied up in probate while your family is trying to carry on with the day to day after you're gone. Now, important, fund it. You've probably heard that before and you were probably told that by your attorney. Fund the trust. But how? What does funding your trust look like? Today I'm going to discuss just that. Let's first chat about personal effects. This would include your clothing, your household furnishings, jewelry, and really any personal property that does not have an account or certificate of title attached to it. Depending on where you got your trust prepared, you likely executed a certification of trust and an assignment of personal property. Both work together to assign all your personal property and effects into the trust. Now, anything that you own now and anything you acquire into the future. They essentially act as a bill of sale from you to your trust. See? That was easy. All right, next. What about your cars? Well, vehicles are assets that have a certificate of title. Vehicles can go either way. It's up to you, the trustmaker, you the trustmaker, to decide whether you want to retitle your vehicle into the trust or not. Cars and boats are considered high risk for liability, which can put the rest of your trust assets at risk. So it's not a deal breaker if your car does not go or does not get retitled. Here in the District of Columbia, Maryland, I never recommend moving the vehicles into the trust. This is because you can actually accomplish that by completing a beneficiary designation form that effectively transfers the vehicle upon death and thus avoids probate. In other jurisdictions, however, you most likely will have to retitle the vehicles by applying for a new certificate of title through the DMV. When doing so, instead of having it titled as John Doe, you will retitle it as John Doe, trustee of the John Doe Living Trust, or however your trust is named and whoever the trustee – the name of the trustee. It's important to have the new owner be the trustee of the trust rather than you individually. You may need to bring the certification of trust with you as the DMV may need you to prove that the trust exists and that you are the trustee. Okay, let's talk about bank accounts. Savings, checking, money markets, and CDs should all go into the trust. Go to the bank where these accounts are located – hopefully not Wells Fargo or Bank of America because they're difficult to deal with in this regard – and follow their established procedures to transfer your accounts from your own individual name to the trust, i.e., as we talked about before, the John Doe, trustee of the John Doe Living Trust. Each bank will have its own policy and forms for this, but all will require you to have the certification of trust or certificate of trust with you to establish the existence of the trust. Remember, your trust is a private document. By law, you cannot be compelled by these banks to present your trust. All you need is a certification of trust. All right? Brokers' accounts. They're similar to bank accounts. So any non-deferred securities-based accounts need to be retitled as well unless it already has a beneficiary designation attached to it. Again, each company will have their own policies and forms to make this happen. If you work with a financial advisor, your advisor can help do this for you. Title it just the same way we talked about it before, as you're checking in savings accounts. John Doe, trustee of the John Doe Living Trust. For married couples with a joint trust, title it as John Doe and Jane Doe, co-trustees of the Doe Living Family Trust, or however your trust is named. With very few exceptions, we often advise our clients to make their trust a beneficiary of these accounts. Before making this decision, however, you should chat with multiple advisors or with your multiple advisors, such as your lawyer, your tax advisor, and your financial advisor. Retirement accounts, such as IRAs, 401Ks, and other deferred accounts are considered non-probate accounts, meaning they're payable on death, as long as your beneficiary designations are up-to-date and accurate. I generally do not have clients change their IRA or 401K in any respect, unless they're directed to by a financial advisor. This is because there are tax issues that may arise if you change the beneficiary of the IRA or the 401K to the trust instead of an individual. Seek tax advice from a tax professional before doing so. Typically, 401Ks and 403Bs cannot have non-human beneficiaries, so a trust is not always the best option for these types of plans. But traditional IRAs may have an IRA beneficiary, a beneficiary trust as its beneficiary, which can mirror the distribution schedule of the rest of your plan. Now, for life insurance policies, they are also non-probate, meaning they're payable on death. It's still a good idea to make the trust the beneficiary of these policies, however, for a couple reasons. First, there are no tax issues in making such a change because life insurance policy death benefits are tax-free. Second, if you intend to transfer all of your assets to the trust and for the trust to support your family, it just makes sense to have the insurance policies or insurance proceeds included in the trust to consolidate assets and have all your assets following the same distribution schedule. Also, if your beneficiary is incapacitated or a minor, your trust has language and safeguards or should have language and safeguards to ensure your wishes are protected. Finally, it injects your trust with cash to wrap up any of your final expenses like funeral costs and a final hospital bill. Do not change ownership of the policy. Very important, just change the beneficiary of the policy to the trust. Okay, now let's talk about your house. With a house, it could take two paths. If you're married, your home has added creditor protection included by owning the home as tenants by the entirety, commonly referred to as T by E, or at least in the legal profession referred to by T by E. This ownership designation prevents a lien from going against the home unless the lien is for a joint debt by both spouses. A marital home passes outside of your probate, outside of the state. So unless both pass simultaneously, the house is nonprobate. However, if you're more worried about streamlining the asset succession process and where the funds go and the possibility of both spouses passing away together, moving the house into a trust may be more valuable to you than any creditor protection. If you're single or widowed and you own a home individually, it may become subject to probate and does not have the T by E creditor protection. So it should be deeded into the trust. This is accomplished by executing a deed from yourself to the trust, i.e., John Doe, trustee of the John Doe Living Trust. And in our office, we prepare and record the deeds for our clients. It can be done by a quick claim deed also, but we'll discuss that at another time. If you hold any publicly traded stocks or bonds that are already in brokers or investment accounts, contact your brokers or the custodians and direct them to change the title of the accounts to the name of your trust. The procedure for doing so is the same as the procedure for retitling those cash accounts as we talked about before. You may have to complete a new account application and present a copy of your certification of trust in order to change the title. Title to the account should be in the trust name. After changing the title, your next statement should confirm the retitling by listing you as a trustee of your trust. If you possess original stock and bond certificates, there are two ways to transfer the certificates into your trust. The first is open a brokerage or investment account in the name of your trust and deposit your original certificates into that account. You may later have your broker deliver the certificates to you made out in the name of the trust if you so wish. Your future account statements titled in the name of the trust will prove your ownership of the transferred stock options. The other option is to work directly with the transfer agent for the stock or bond and direct the agent to reissue your stock in the name of the trust as the new owner. Transfer or signing stock options requires a more careful analysis of the tax and legal issues specific to you. We always recommend that you ask your CPA, your certified public accountant, and your stock plan administrator about your choices in assigning your interest to your trust. Finally, let's talk about business interests. The first is if you have a partnership, there is no restriction and there is no restrictions on your general partnership agreement or in your general partnership agreement. Your interest in the general partnership should be transferred through a written assignment of interest signed by you and acknowledged by your partners. Transfer of an interest in a limited partnership is accomplished the same way as you would transfer a general partnership interest. In our office we typically prepare those assignment documents for each interest for your signature as well as the partner's. For corporate business or professional interests, it's advisable to contact your corporate counsel or ask your attorney to assist you in transferring the professional business interest to your trust. If your business is a corporation, you'll have to cancel the shares held in your name and have them reissued in your name as trustee of the trust. If the business is a limited liability company, you can have your attorney or you can draft the assignment documents to assign your interest to the trust. Now for a sole proprietorship, which is a business or entity owned by one person, ownership of the sole proprietorship can be transferred to the trust with a written assignment of interest just like the partnership. All of the items of tangible personal property should be listed individually or by category in this assignment. Hope you learned something new today. If so, please like, share, and subscribe. As always, if you want additional information or to discuss your own estate plan, call us at 301-892-2713. That's 301-892-2713. Or you can reach us at our website, www.estatecast.com. That's www.estatecast.com. We know that life is precarious. Our goal is to give you peace of mind and help you live with your bags packed. We never know what tomorrow may bring.