Initial Funding
Once your trust is signed, your attorney will have you sign a few documents to start the funding process.A pour-over will (see Appendix F) is signed for each grantor and has two purposes. First, it is a backup document that transfers all assets that are in your names at your deaths to the trust. However, as mentioned earlier, we do not want to use the will for that purpose, since our plan is to have all assets already in the name of the trust at your deaths. Probate avoidance is one of the purposes of the trust and we do not want to probate the will. Second, if you have minor children at the time of your deaths, or a disabled child who is under a court-appointed guardianship, the will is used to appoint the people of your choice to be their guardians.
Deeds
Deeds will have been prepared transferring all your interests in real estate to the trust name. Out-of-state property should be taken care of at this time by signing the deeds prepared by the other state’s lawyer. The deed will be from you and your spouse, or co-owner if not married, to the trust. It could read, for example:Grantor, John H. Doe, an unmarried man, quit-claims to the John H. Doe Revocable Trust u/a dated April 1, 2021.
Personal Property
Personal property is assigned to the trust with an assignment form (Appendix G). This is just a document stating your intention that any personal property—including but not limited to furniture, household goods, machinery, tools, lawn equipment, farm implements, jewelry, artworks, collections, animals, and intangibles such as contract rights, patents, trademarks, royalty rights, manuscripts, and any other non-titled asset owned now or acquired in the future—is intended to be trust property. It should be notarized and kept with all your other trust documents.Investment Accounts
Investment accounts, deposit and bank accounts, CDs, money market accounts, insurance policies, bonds, stocks, or brokerage accounts will be assigned into the trust name, or the trust can be named the beneficiary of the account if you wish. The companies managing these will have their own forms in most cases, written with the language and provisions they prefer. You can request the forms ahead of time so that they can be signed contemporaneously with the other paperwork. It is sometimes necessary to go to the bank or office to complete these transfers. Make sure that they understand that this is not to be considered a sale and repurchase of the asset, merely a name change. No capital gains tax should be incurred, and the tax basis should not be changed. Your broker is not entitled to a transaction fee for making this change.Vehicles
Vehicles and watercraft, as well as recreational vehicles and mobile homes, will have titles and can be retitled in the trust name at your local tax office or secretary of state office—whichever agency handles that sort of thing. It will likely take a personal visit to do this.Union, Employee, or Association Benefits
Oftentimes unions, banks, credit cards, and associations will provide death benefits to members such as term life insurance. However, if these are not claimed, then they lapse. Be sure to assign these to your trust, or at the very least make your chosen trustee aware that they exist. The same is true of stock options and even unused vacation time from your employer. These are all assets that should be part of your estate.An Ongoing Process
After the last meeting with your attorney, you should have the original signed trust document in your possession. You will have transferred all your assets into the trust name in one of the methods explained in this book. But that is not the end of it. Things change; people move, get new jobs, open new bank accounts, get new investments. Life is not static. So it is very important that you review your trust periodically to be sure the trust is still fully funded. Otherwise the non-funded assets would have to be probated, and you will have defeated one of the purposes for which you created the trust.
The Annual Review
Some attorneys schedule annual appointments, just as dentists do, to review your trust and update it if necessary. Of course, they charge for these services even if nothing has changed and nothing new needs to be done. Unless something significant has happened in your family relationships or your intentions as expressed in the trust, the only time you might need to see a lawyer is if funding documents need to be prepared; a deed for newly acquired property, for example. Most of the time you can fill out things like beneficiary designations and title transfers without legal help. Years ago, I actually met with groups of banks and estate planners to explain trusts and trust funding requests that they might run into, since trusts were not widely used at that time. Nowadays you will not be met with blank stares when you request that an asset be funded into your trust in one way or another. The business community is now pretty well versed in trusts and will often be able to suggest the best way to proceed.Your annual review should be conducted on a date that’s easy to remember. At that time, you can pull out your list of assets funded into the trust and verify that there is nothing new to add. A new deed might need to be prepared or POD and TOD forms filled out for new accounts.
You should also consider whether changes need to be made to the trust itself. Are the named trustees still appropriate? Are you happy with the distribution provisions and any restrictions on inheritance you previously set up? This is the time to update. When you had minor children you likely named an adult as the trustee of the trust, but years later you may want to name the children themselves as the trustees to maintain simplicity, reduce costs, and preserve privacy.
Avoiding Your Parents’ Probate
Do you expect to inherit? You will be paying for the probate of your parents or others who might leave you something if they don’t properly plan. How to approach this? It can be difficult to broach the subject of wills and trusts with parents. Many are reluctant to talk about it and secretive with their financial situation. When questioned they may say something like, “We already have a will, so everything’s taken care of.”This is when you can reply easily without seeming to pry by saying, “That’s what I thought too, but I went to a lawyer and found out that wills have to be probated, which I didn’t know. She set me up with a trust and medical directives so we won’t have to go to court when the time comes.”
Trust Safekeeping
Okay, so everything’s signed, everything is transferred to the trust. Now what do you do with all the paperwork?You are responsible for keeping your documents together and making them findable at your death. When I do trusts, I put everything in a three-ring binder with pockets to store transfer documents and copies of deeds. Still, once in a while I get a call from heirs who cannot find the trust. When I tell them to look for the binder, sometimes they locate it, sometimes not. The attorney does not usually keep the client’s documents. We might have a copy, but the originals are taken home with them. The heirs start looking and sometimes are expecting a stack of papers or file folders and not a binder.
(To be continued...)
This excerpt is taken from “How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones” by Ronald Farrington Sharp. To read other articles of this book, click here. To buy this book, click here.
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