You Signed Your Revocable Trust, But Did You Fund It?

A properly funded trust will avoid probate upon your death and provide management of your assets without court involvement should you become disabled or incapacitated. Although your Last Will and Testament may provide that all assets pour over into your trust for further disposition, that is only after they pass through probate.

Regarding the assets under the trust umbrella, they need to be titled in the name of the trust. Assets such as individual retirement accounts and pension plans pass pursuant to a beneficiary designation. Unless the trust is named as a beneficiary, such assets will not be held by the trust. Similarly, assets held in joint tenancy with rights of survivorship will pass upon death to the surviving joint tenant by operation of law, and not pass to the trust.

Review each of your assets and determine if the title should be changed to the trust. Generally titling assets in the name of your trust should be similar to the following “John Doe, as Trustee under the John Doe Revocable Trust, dated March 14, 2010.” The trust will be identified by your social security number and only your 1040 individual income tax return will be required.

Changing title to your trust:

  • Stocks and bonds held in certificate form. The original certificate must be returned to the stock transfer agent in exchange for a new certificate in the name of your trust.
  • Investment/brokerage accounts. Consult your institution for specific instructions on changing title of the account to your trust – it may be a simple name change, or you may have to transfer the assets from the current account to a new account.
  • Bank accounts and certificates of deposit. Re-titling bank accounts is similar to re-titling investment accounts. However, before you re-title a time deposit (e.g., a CD) confirm there are no adverse consequences because your bank may consider the re-titling of a CD as an early withdrawal of funds.
  • Tangible personal property (art work, jewelry, rugs, etc). A transfer is generally accomplished by bill of sale or a deed that describes either general categories of property or specifically lists items. Notify the insurance company of any insured property.
  • Closely-held business interests. Review any shareholder, partnership or operating agreements for restrictions on transfers and specific procedures that must be followed to re-title your shares or interests.
  • Promissory Notes. Ownership can be changed by assignment of the note to the trust by the payee.

Once titled in the name of your revocable trust, any amendments relate back to the original trust, so there is no need to re-title your assets each time you modify the terms of the trust. When you acquire additional assets, remember to consider titling them in the name of the revocable trust.

Tarta Law Firm NJSteven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.

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