Many people considering a Living Trust ask whether it should be funded during their lifetimes.
The answer, in the vast majority of cases, is Yes! Some of the important things that a fully funded Living Trust can accomplish are the following: avoid Probate expenses and delay for assets titled to the trust, avoid Probate in another state if assets are titled to the trust and there is property owned in another state, allow successor trustee to handle finances in event of incapacity or incompetence of grantor(s) (people who made trust), succession planning for closely held business, provide for division of assets of married couple if estate is greater than $10,900,000, and bring together all assets in an organized manner.
Real estate should be titled to the trust, and an attorney must make the deed. The deed should be recorded in the County in which the property is located. Out of state property, including vacation homes, time-shares, etc. should also be recorded. Homeowner insurance companies should be notified, and the trust should be listed as an additional insured. Transfers to the Living Trust are exempt transfers. Oil and gas interests may also be assigned to the trust.
Automobiles, RV’s, boats, etc. may be titled to the trust. It may be better to do so after the first spouse dies due to the recent change in Ohio law which permits the surviving spouse to take (2) vehicles in his/her name outside of Probate if their combined value is less than $40,000.00. Other personal property may be transferred to the trust by means of a properly executed Bill of Sale, which generally assigns all furniture, appliances, jewelry, clothing, household items, etc. to the trust.
Bank accounts, money market accounts and Certificates of Deposit may all be titled to the trust. Re-titling these assets to a trust does not cause any early penalty withdrawal penalties, since, in most instances, these accounts are still reported for income tax reporting purposes under the Social Security Number of the grantor (maker of the trust). Banks permitted to sell securities, brokerage firms, and transfer agents easily transfer publicly traded securities to the trust. In most cases, a copy of the trust or certificate of trust must be presented with the stock certificates to transfer. A signature must be guaranteed by what is referred to as a Medallion Guarantee on the back of the Certificate. Brokerage accounts at stock brokers should be retitled to your trust; an example: John L. Smith, Trustee(s), or Successor Trustee(s), of the John Smith Trust dated December 1, 1998.
Closely held business interests may also be transferred to the trust. A Limited Partnership, General Partnerships, and Professional Corporation shares may also be transferred to the trust. It may be necessary, however, to secure the permission of the partners or corporate officials prior to such a transfer.
Who should fund the trust?
In most cases, the individual should consider funding the trust himself/herself with some assistance from his/her attorney. Be careful of revealing your account numbers to strangers. Most attorneys, for liability reasons, will draft letters of instruction to banks/credit unions, stockbrokers, financial planners, life insurance agents, and retirement account IRA or 401(K) administrators for you. The listing of account numbers on this letter is then done by you. The attorney will spell out the appropriate “owner” or “beneficiary” designation on these letters. Verification of transfer to the trust should be done in about 45-60 days of delivery of this letter to the appropriate institution.
A funded trust is a definite advantage in the overall estate planning process. Ongoing efforts to maintain funding should be done. Whenever a new bank account or certificate of deposit, bond, or stock share is purchased, title should be held by the trust. It is a good idea to maintain a log of your trust assets so that your successor trustee is aware of their location and account numbers.
Never accept documents drafted by a non-attorney, and always personally meet with the attorney who drafts your documents. Execution, or signing of your documents, should be at your attorney’s office or in his/her presence, if at all practical.