Estate planning: Transferring Assets Into Your Revocable Living Trust
Creating a trust doesn’t just end there. A trust is as good as an empty purse when it has not been funded. To fund a trust is to transfer assets into the trust, and the trust becomes effective immediately.
What Assets Should I and Should I not Transfer Into my Revocable Living Trust?
In transferring assets into your revocable living trust, care should be taken so as not to transfer those assets which are better left alone. Since the purpose of a revocable living trust is to plan for mental disability and avoid probate, there are assets which are more suitable for funding into a revocable living trust.
The foremost purpose for creating a living trust is probate avoidance, and since probate cost increases with the value of property probated, it is wise to avoid probating something as valuable as a real estate by transferring it into a trust. If there is a loan on the house, the debt will follow the house into the trust and down to the beneficiary.
Vehicles and Other Personal Property
A good estate planning attorney would advise you not to transfer your vehicle into your revocable living trust, especially when you still very much use it. There is no penalty if you do, but imagine having to take it out of the trust anytime you want to use it, unless you are the trustee. Also imagine how complicated it would get doing registration and insurance in the trust’s name. Most insurance companies do not even allow it. You could easily use a pour-over will to transfer the vehicle to the trust at your death. You could do the same for other personal property like computers, furniture, jewelry, etc.
These include all kinds of savings, fixed-deposits, money markets, etc. While all bank accounts can be transferred into the revocable living trust, transferring a Certificate of Deposit (CD) account into your trust may be seen by some banks as you withdrawing the funds, and you may be penalized.
Non-retirement Investment and Brokerage Accounts
These include assets held in an account titled in your name, or in joint names. Changing the name to that of the trust (when you transfer such accounts to the trust) may attract an income tax penalty. It is better to designate the trust as the beneficiary of such accounts than funding them into the trust. These do not include retirement accounts and qualified annuities.
Putting your business though the lengthy process of probate can be calamitous for your business. Your executor would have to run the business during that time under court supervision, and this may lead to huge losses as his or her attention would be divided. It is better to transfer your business interest directly to your beneficiary through a revocable living trust, so they can immediately take charge of the business after your death.
Individual retirement accounts and 401(k)s can never take the name of the revocable living trust. The only way to go around this is naming the trust as the beneficiary.
These can easily be transferred into your revocable trust without consequences. You can as well name your trust as beneficiary.
Stocks and Bond
For stocks, you must return the original certificate and request for a new one if you desire to transfer the stock into your revocable trust. You have to obtain a “Medallion Signature Guarantee” on the stock transfer form, and make insurance for 2% of the shares current market price. Apparently too much hassle for an asset as simple as stocks and bonds. If you have a brokerage account already in your living trust, avoid all that stress by simply depositing your stock certificate into the brokerage account.
Loans and Mortgages You've Made
It’s recommended you redraft such agreements and put the trust in place of your name so that it becomes the current lender.
Life insurance proceeds do not go through probate before being inherited by the beneficiary, so there really would be no need transferring it into the trust. If you must, know that you are giving your trustee legal authority to handle your insurance proceeds, and they may borrow against its cash value to pay for your health care during incapacitation. Nevertheless, if you have designated a minor as the beneficiary of your life insurance, you should name the living trust as the new beneficiary and have a trustee manage the funds on their behalf. As life insurance policy are taxed as part of your estate, you should speak to your estate planning lawyer about how to keep insurance proceeds out of the estate.
Estate Planning Attorney Near me 10020
There are so many complex assets which you may have that require special tax planning. Kindly speak with a qualified and well-vast estate planning lawyer in your area to find out the best ways to handle every asset which you own, and be assured that he’ll hear you out and proffer you the best reasonable solution.