How to Transfer Assets into Your Trust
So you’ve set up a living trust-based estate plan; now what? Is your estate planning complete? Not quite yet! Remember that your revocable living trust will only prevent probate if you properly transfer your estate assets into it.
The #1 estate planning mistake we see is failing to transfer asset titles to a trust. How does this happen? In this blog post, we’ll discuss some of the reasons this mistake is made, and how to avoid it. You can also check out this video for more information.
2 Common Pitfalls
One common pitfall is allowing your home to be taken out of trust when re-financing and then forgetting to transfer the title back to the trust when the process is complete. Make sure to ask the refinancing company if they will be putting your home back into the trust when they are done. If not, an estate planning attorney can draft a deed to take care of this important step.
Another common pitfall is setting up a trust and then, later on, forgetting to transfer a valuable account into the trust. Every now and then, while administering a trust after a settlor dies, we discover a sizable asset has been left outside of the trust.
When this happens, if the value is greater than $166,250 (in 2020), then we have to open a probate in order to take possession of the forgotten asset. That means that by failing to transfer all of your assets into your trust, you might defeat one of the main reasons you created the trust in the first place – avoiding the probate process!
How to Transfer Assets into Your Trust
Not transferring assets to your trust is an expensive mistake to make. To help you avoid it, here are some helpful tips on transferring four kinds of assets into your living trust: real estate, bank/ investment accounts, vehicles, and retirement accounts/life insurance.
Title on real property must be transferred by a deed, usually a Trust Transfer Deed, and recorded with the County Recorder. Make sure that if your home is ever taken out of trust for a refinance or for any other reason, that it is transferred back into the trust.
If you need help checking the title or transferring real estate back into your trust, seek a qualified estate planning attorney to assist you in making sure this is done properly to avoid probate.
Bank Accounts, Stocks, Bonds, or Other Investments
Here’s how to handle checking accounts, savings accounts, brokerage accounts, stocks, bonds, and other similar types of assets. Contact the financial institution and request to change the signature card of your accounts to show title as you as trustee of your trust. This can usually be done by showing a Certification of Trust (which is a shortened summary of your trust). Some institutions may request to see a copy of the trust; policies vary.
Transferring title to vehicles is generally not necessary unless the car is extremely valuable. (Remember, the value must be over $166,250 in 2020, so think Rolls Royce!) But if you’d like, you can put the title in your name as trustee of your trust the next time you purchase a vehicle.
Retirement Accounts + Life Insurance
You won’t transfer title to retirement accounts or life insurance to your trust. But you may want to change the beneficiary on these accounts to list the trust as a backup beneficiary to your primary desired recipient. For example, many married couples list their spouse as their #1 beneficiary, with the trust as #2, assuming they want the funds distributed according to their trust.
NOTE: If you have named charities in your trust, you will NOT want to name your trust as a retirement account beneficiary, due to tax laws requiring liquidation.
Personal property includes items as clothing, mementos, guns, jewelry, family heirlooms, furniture, etc. Personal property does not have a title and is best handled with a Letter of Instruction.
We hope this overview on how to transfer assets into your trust to avoid a California probate has been helpful. If you have any questions about this process, please feel free to contact our office or seek the advice of a qualified estate planning attorney.
Daniel Hunt is lead attorney and owner at Law Offices of Daniel Hunt. He is also a California State Bar Certified Legal Specialist in Estate Planning, Trusts & Probate Law.