During the estate planning consultation, you may determine that a living trust accomplishes some of your goals such as avoiding probate, maintaining privacy or setting up terms for asset distribution. The attorneys will create your trust document and you will sign and execute it. That signature is not the final step. Once the trust is created, you still have to fund it. The process of transferring your assets and updating beneficiary forms is referred to as “funding”. There are different methods for each type of asset. Here are some tips for properly funding your trust.
What Should You Name Your Trust?
There are three parts to a trust’s legal name:
1. The Grantor’s complete legal name
2. The name of the trustee
3. The original date of the trust
Example: The Jane B. Doe Revocable Trust Dated September 12, 2022, Jane B. Doe, Trustee
Tax Identification Numbers
For a revocable trust, you can use your personal Social Security number as the TIN. If the trust is irrevocable, you will need to obtain a new tax identification number from the IRS.
Transferring Real Estate
To fund a trust with real estate requires signing and recording a deed. A deed is an official document declaring legal ownership of property. The type of deed depends on your situation and goals. Most often you will use a recorded quitclaim deed. A spouse will also need to sign the deed for clear title.
Transferring Retirement Accounts
You cannot transfer most retirement accounts into a trust while you are living, but you can name the trust as the beneficiary on the account. Keep in mind that leaving retirement benefits to a trust involves clearing numerous income tax, minimum required distribution and trust accounting hurdles. Distributions from tax-deferred accounts are governed by strictly enforced tax laws. When a trust terminates, the trustee can transfer, intact, to the beneficiaries the retirement plan held in the trust.
Transferring Bank Accounts
There are two options here. First, you can change the ownership of the account to your trust or you can allow the account to remain in your individual or joint name(s) and complete a payable on death form for the account to bypass probate and transfer into the trust upon your death. If you choose to change ownership to the trust, you will need to visit your bank branch with a copy of the trust document. Ask a manager to change the account ownership. Some banks will simply change out the names, but others will require you to close the account and open a new one.
Transferring Financial Investments
Investments, other than tax-deferred retirement accounts, can be handled in a similar manner as the bank accounts. Generally, your financial advisor can provide an instruction letter to the financial institution holding the investment account requesting the name be changed on the account from your individual name to the name of the trust. Some institutions may require the account to be reopened under a new account number and if so, will provide you with the necessary forms.
Transferring Life Insurance
Life Insurance is not paid out until your death, so you can name the trust as your beneficiary. If you are married, you may want your spouse to be the primary beneficiary and the trust the contingent beneficiary. Contact the life insurance company and ask how to update beneficiary designations. They may request a copy of the trust document.
Transferring Business Interests
Privately owned business entities such as corporations and LLCs issue share certificates to indicate ownership. These certificates are usually issued when the business is set up. The certificates are accompanied by a signed resolution where all the owners testify to the ownership structure. Typically, transferring your business interests into a trust simply requires completing an assignment form. It is helpful to also get an updated resolution signed by all owners acknowledging the change of ownership.
Transferring Personal Property
For cars and watercraft, the titles will need to be updated to reflect the name of the trust. Typically, you can do this at the appropriate government office responsible for handling the registration. Other tangible personal property items can be assigned to the trust by way of an assignment form.
Deciding what assets will fund the trust may be a more complicated manner as this is often determined by your overall goals. To create and fund a trust, contact the estate planning attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
