If you choose a Living Trust as
your estate planning document of choice, your work is not done
once you have drafted and signed it. In addition to signing the
trust document, you must also fund it.
Funding Living Trust means
changing ownership, beneficiary or both of all assets to your
Trust. If you fail to fund the trust your estate planning
objectives may not be met and some or all of your estate may go
through probate.
In this first article of the
series titled Funding Living Trust What You Need to Know, we
will discuss bank accounts.
Bank Accounts and other time
deposits such as certificates of deposits in most cases should
be re-titled to your living trust. This means changing
ownership.
Here is an example of what you
can tell the bank in the instruction letter.
On _____________________ we
signed the __________________ Revocable Trust Agreement for
estate planning purposes.
This trust is a GRANTOR TRUST
as defined under the Internal Revenue Code §676 which states in
part;
The grantor shall be treated as
the owner of any portion of a trust where at any time the power
to revest in the grantor title to such portion is exercisable by
the grantor,
We are requesting that you
RE-TITLE the above referenced account instead of opening a new
account because:
- The address and all other
records stay the same;
- The social security number
(which is the tax id of the trust) remains the same; and
- The authorized signers
remain the same.
This account should now be
titled
_________________ &
_________________, trustees or successors of the
_________________ Revocable Trust Agreement dated
_________________.
In most cases the bank will
re-title your current accounts and not force you to open new
ones. It is not preferred if they say your old accounts must be
closed and you have to open new ones because you most likely
have automatic deposits and withdrawals occurring with these
accounts that would be a large task to change. If they tell you
this make them give you a valid reason. Also your checks can be
printed any way you wish; they do not have to carry a trust
title designation. They most likely can be the same as they
read before the trust re-titling.
With respect to Certificates of
Deposit, you should contact the bank involved and ask what is
required for you to re-register the certificates in the name of
the trustee. Confirm that no penalty will be assessed for
premature surrender. If a penalty will be assessed, you should
consider not re-registering the certificates until maturity or
see if the bank will put a pay on death, POD, or transfer on
death, TOD, designation on the certificates. Then after
maturity of these certificates, the proceeds should be
reinvested in the name of the trustee.
Please check back soon for part
2 in the series Funding Living Trust - What You Need To Know
Stocks, Bonds and Mutual Funds
