FUNDING PERSONAL PROPERTY INTO A REVOCABLE LIVING TRUST
Whether personal property is funded into a trust is primarily a matter of intent. With every comprehensive estate plan that we do, we include an “Assignment of Personal Property,” which explicitly states that all personal property is thereby intended to be funded into the trust. This document is signed and notarized and effectively binds all of a client’s personal property to the terms of the trust. Occasionally, clients will express a desire to use their estate plan to ensure that a specific item of personal property be bequeathed to a certain beneficiary (i.e., a wedding ring left to the oldest daughter, etc. In such a case, a specific sub-share will be carved out of the general trust estate with the applicable provisions, but the act of funding the trust with such property does not change. In sum, a specific written declaration making the assignment of all personal property to the trust is the most effective way to fund personal, non-titled property into a trust.
FUNDING BANK / INVESTMENT ACCOUNTS (NON-QUALIFIED RETIREMENT PLANS) INTO A REVOCABLE LIVING TRUST
Funding a bank account into a trust is as easy as going into the local branch office of your bank and requesting a change to the name on the account. This is a very common transaction for nearly all banks, and as so, it is a pretty painless thing to do. Most banks allow holders of accounts held in the name of their trust to transact business in the exact same manner as they would with an account that is in their name as an individual. This means most of the procedures one deals with on a daily basis (i.e., signing checks, using a debit card, transferring funds from one account to another) do not change in the least bit; although technically the name on the account would be, “John Doe, Trustee of the Doe Family Trust Dated January 1, 2008,” one would only need to sign checks, “John Doe,” and using a debit card or transferring funds would be the same as if the account was held individually.
FUNDING QUALIFIED RETIREMENT PLANS INTO A REVOCABLE LIVING TRUST
Qualified retirement accounts involve any tax-advantaged investment. The most common Qualified Retirement Accounts are 401(k)s, IRAs, Roth IRAs, 403(b)s, etc. For a married couple, the first consideration in transferring qualified retirement plans is to explore the option of rolling-over such plans to a surviving spouse-thus preserving the tax-preferred status of the investment. There are estate planning techniques involving “stretching out” one’s IRA, but that is beyond the scope of this guide. Consequently, if congruent with the creator’s wishes, the spouse should be the primary beneficiary to allow continued tax deferred growth. This is most likely the situation since the spouse’s consent is required to name anyone else as a beneficiary on a qualified retirement account that is funded with community property funds. Naming the trust as the secondary beneficiary will allow the contents of the qualified retirement account to be distributed per the terms of the trust.
FUNDING REAL PROPERTY INTO A REVOCABLE LIVING TRUST
Title on the property needs to reflect ownership in the trust by naming the creator, as trustee of the named trust, as the owner. This is most commonly effectuated by the preparation of a grant deed transferring the property from the creator as an individual to the creator as trustee of the trust. The grant deed needs to be signed, notarized, and recorded like any other transfer of property. In California, a form referred to as a “Preliminary Change of Ownership” is also required. Both the grant deed and the PCOR are produced and completed as part of most comprehensive estate planning packages. It is important to note that although most transfers of property result in a reassessment of that property transferred for property tax purposes, any transfer of real estate into one’s own revocable living trust does not result in such reassessment. Other forms of real estate ownership such as a co-op, LLC share, etc. are transferred in the same way as a business (see below).
FUNDING BUSINESS INTERESTS INTO A REVOCABLE LIVING TRUST
All owned shares, units, or business interests need to be named as owned by the trust. This can be done by simply endorsing the actual paper shares of the entity, or by performing a stock assignment (a service Citadel provides). Any property or other value owned by the company or entity is automatically “funded” into the trust by the simple fact that the owning entity is funded into the trust. In any regard, there are many more advanced methods of transferring a business to successive owners / beneficiaries, and although funding it into the trust should be done immediately, a separate discussion regarding business succession planning is needed.
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