Funding Your Revocable Living Trust
We have discussed in a previous newsletter, the advantages of choosing a revocable living trust as the center piece of the estate plan, as opposed to relying merely upon a will and the probate process, or joint ownership of assets. Clients enjoy the cost savings involved with the administration of a revocable living trust, as opposed to probate, and the control they have over the assets that they have transferred to their revocable living trust. The trust can provide for the surviving spouse, save estate taxes and help to avoid incapacity and conservatorship issues. Moreover, the trust provides a plan and a mechanism for the makers of the trust that will benefit them as they advance in years. If the makers of the trust no longer feel that they want to or can handle their own assets, the successor trustees, typically their children, will administer the assets of the trust for the benefit of their parents. Upon the passing of the parents, the remaining assets are transferred to the children, for instance, through trust administration, without going through the probate court process,
However, as we know, the trust must be funded. The attorney will typically complete the transfer of the real estate to the trust. The clients will then make the transfer of other eligible assets to the trust, and consult with their attorney in this regard. Please remember that assets that are not funded into the trust could end up in probate. The court probate process is what we are attempting to avoid through the use of the trust. You will usually want to transfer your home and other real estate, bank and saving accounts, investments, business interests and notes payable to you to the trust. You may also want to change certain beneficiary designations to your trust so that those assets will transfer to the trust and be administered pursuant to the terms of the estate plan. IRA and tax deferred plans are not transferred to the trust.
A transfer of assets is completed by changing the title of the assets from the individual names of the makers of the trust, to the trustees of the trust. The makers of the trust, for instance a husband and wife, will typically name themselves as co-trustees of the trust in order to retain complete control of their assets. Beneficiary designations on other assets are changed to name the trustees. For instance, the family home would be transferred from John Doe and Mary Doe, husband and wife as community property, to Jane Doe and Mary Doe, trustees of their revocable living trust. In this manner, as we have previously discussed, you maintain control over your assets, and can sell and purchase real estate, stocks, etc., just as you normally would. The only difference is that you do this in the name of the trustee.
The process of transferring assets to the trust is not difficult, but can take some time. A copy of the “certification of the trust,” which is one of the estate planning documents, is usually reviewed by the institution where you have your asset, such as a bank or a stock broker. The various institutions are usually very familiar with transferring assets to trustees of revocable living trusts, and they have their own forms for doing so. Many times you can handle the transfer by telephone and mail.
Other Probate & Trust Newsletters
Avoiding Probate in California
Can I Have a Trust for My Pet? Yes!
“My Son In Law is a Big Fat Dummy.” Remedy: The Personal Asset Trust
The Revocable Living Trust – Preparing for Incapacity