This brochure is one of a series discussing estate planning topics. It provides general information, not legal advice. For advice concerning your specific needs, consult your attorney. If you have suggestions or comments about our brochures, please let us know. You may write us at the address below or e-mail us at: email@example.com
If your estate plan includes a "living trust" you'll need to consider how and when to put assets into the trust. Most estate plans that include a living trust, also include a "pour over will:" a will which transfers assets to a trust: It "pours over" into the trust. However, leaving assets to a trust by will doesn't take advantage of some benefits. It doesn't avoid probate for those assets, and it doesn't make those assets available to a trustee who is acting on behalf of an elderly or disabled beneficiary. For those reasons, and others, it is often best to transfer assets into the living trust soon after you create it.Which Assets?
Deciding which assets to put into the living trust (or which assets should be allocated among multiple trusts) is an important issue. There are both estate tax and administration issues involved and they come in so many varieties that it isn't possible to give much in the way of useful general answers. We can say that if a trust is intended to take full advantage of the unified tax credit, then it must have assets to which the credit can apply. The other general principle is that an asset that is outside the trust is not available to the trustee for the benefit of the beneficiary. If you have financial assets that you wish to have held in trust for your benefit if you become disabled, they need to be in your trust when the time comes.
When you set up your trust, your attorney will help you fund your trust if you wish. The more you can do for yourself, the less it will cost to fund your trust. Most assets can be readily transferred to an existing trust by the client who wishes to take the time and trouble. A list of assets and who is responsible for transferring them can be very helpful.Certificate of Trust Existence
To transfer assets into your trust, you'll need a "Certificate of Trust Existence and Authority." This is a summary or quotation of selected parts of your trust. This enables a person to know the correct name of the trust and to be sure that the trust has power over its assets. It usually does not identify the beneficiaries or the assets enabling you to keep that information confidential. Often, attorneys prepare both a trust and a Certificate of Trust Existence and Authority at the same time.
When you wish to transfer a bank account from your name to the trust, the clerk will usually wish to see a copy of the trust. If you'd prefer to keep the terms confidential, give them a copy of the Certificate of Trust Existence and Authority. This usually has all the information the bank needs to have.Naming the Trust
Suppose you wish to transfer an account to your trust, and your name is Gustavus Schwartzgeld. There are both short and long forms for naming the trust; most of us use the short form wherever possible. Occasionally a brokerage or insurance company will want the long form.
Long FormFederal Employer I.D. Number"Gustavus Schwartzgeld Trustee under Declaration of Trust dated May 15, 1996 wherein Gustavus Schwartzgeld is Settlor and Gustavus Schwartzgeld is Initial Trustee."Short Form"Gustavus Schwartzgeld Trustee u/t/d May 15, 1996."Signing a document.When acting as Trustee, it is usually sufficient to sign your name: Gustavus Schwartzgeld, Trustee.
You don't need to get a new federal identification number for the trust during your lifetime. You report all of the income and expense of the trust on your personal tax return. A trust will become irrevocable upon the death of the creator of the trust and will require a separate number then.Specific Assets
The "new accounts" person at your bank can help you transfer your existing accounts into the name of your trust. As we discussed above, a copy of your Certificate of Trust Existence and Authority will give them the information they need. Certificates of Deposit usually can be changed over when they mature.Brokerage Accounts
Most of our clients try to transfer securities and investment accounts to their trusts soon after the trust is set up. These assets are easy to transfer and are most useful to a trustee if administration is necessary because of disability or the like. If the brokerage or investment account is joint with your spouse or another person, the brokerage may require that the other person sign the request to transfer the account. Call your broker and request the necessary forms. Most brokerages make this easy. If your account has a beneficiary make sure to change the beneficiary to the trust.Business Interests
There is no general rule for whether to make business interests part of a trust. Each situation is unique and requires individual consideration. When you decide to add that business interest to your trust, you must comply with the terms of any shareholder's or partner's agreement concerning transfer. For example, if a partnership agreement forbids transfer of a partnership interest and does not except living trusts created for estate planning purposes, it will be necessary to get the consent of the partners. The same considerations apply to closely held corporations.Certificates of Title
Automobiles, boats, RVs, anything with a certificate of title can be transferred to your trust. Unless there is urgency, most people prefer to wait until they buy a new car or have another need to visit the Secretary of State. Again, your Certificate of Trust Existence and Authority will be helpful. Change your insurance when you change the title so that the trustee is named the insured under the policy.IRAs and Pensions
In the case of a husband and wife, don't add IRAs to the trust or name the trust as beneficiary. Usually it is better to name the surviving spouse as beneficiary of your IRA account. He or she will have more flexibility in choosing options than would the trust. If a substantial portion of your assets are in an IRA or other pension forms, make sure to discuss this point with your estate planner. Because of the tax-deferred character of these investments, they require special treatment.Life Insurance
Life insurance is often transferred to the trust or made the beneficiary of the insurance policy, or both. This is very often an important planning consideration in your estate plan. If you have life insurance, make sure to review this with your estate planner. Accomplishing the transfer is usually easy. Just request the forms from your insurance agent, but make sure you're following the plan for funding the trust. If the trust, for example, owns the policy but is not the beneficiary, someone other that the trust will receive the live insurance proceeds upon your death.Mutual Funds
Transfer ownership of your mutual funds using the Certificate of Trust Existence and Authority and a form supplied by the mutual fund distributor. If you purchased your mutual funds through a broker, the broker can help you obtain the correct form. If you purchased the fund directly, call them and request the necessary forms to transfer your account to your trust. Note: change the beneficiary on your account to your trust, to avoid having your mutual funds leave the trust upon your death.Real Estate
Transfer real estate by deed recorded with the Register of Deeds. Most clients ask their attorney to prepare the deeds to transfer real estate into the trust. If the property is subject to a mortgage, it will continue to be subject to a mortgage. If you do transfer real estate into your trust, have your property insurance agent name the Trustee as the insured under the policy.
When you fund your trust, it's important to try to keep the assets in the trust. It's easy, when acquiring new assets, opening new bank accounts, and buying a new car, to forget the trust. If this happens, it's not a catastrophe. At worst, the pour-over will restores forgotten assets to the trust. Still, as you make changes in your assets, remember your living trust. If you have questions about funding your trust, don't hesitate to call your estate planner.
We have information for our clients on general estate planning and specifically about living trusts. If you want more information on these topics select the brochures on "General Estate Planning" and "Trusts in Estate Planning."