David L. Crockett, Attorney, CPA, UCLA Law School , J.D. ’69, UC Berkeley ’66
901 Dove St., Ste 120, Newport Beach, CA 92660 Phone: 949-851-1771
Your trust must be funded to avoid probate. Your estate will not avoid probate court unless and until your Trust obtains legal ownership and title of your money and property. Transfer of your money and property into the Trust is known as “funding the trust”. There is a small estate exemption which allows transfer of accounts without probate BUT only where the estate is $150,000 or less. Put another way, the signing of the trust documents is on the START of the living trust setup. You must FINISH the setup by actually transferring legal ownership into the trust as explained below.
The wording to establish trust ownership. Under California law, money and property owned by a Trust is under the names of the trustees of the Trust. Here is the typical wording that will appear on real property deeds and bank statements once the transfer into the trust is done:
“Joe Smith and Jane Smith, Trustees of the Smith Family Trust Dated Jan 1, 2014”
Transfer instructions for basic assets. Refer to the chart below.
|TYPE OF ASSET||STEPS TO EFFECT THE TRANSFER INTO THE TRUST|
|Real estate||A grant deed is prepared showing the trustees as grantees of the real estate and it is recorded with the County Recorder together with other forms to advise the recorder/tax assessor to not increase the property taxes. A transfer into a revocable trust generally does not cause the property taxes to increase.
Caution-when buying or selling real estate or doing real estate loans the legal title often gets changed so you have to make sure after the transaction that the ownership gets deeded back into the trust.
|Property insurance||Notify your fire & liability insurance carriers that your property has been placed into a trust and ask them to name the trust as an “additional insured”|
|Bank accounts||Go to the bank and bring a copy of the trust and/or certification of trust document and they will have forms for you to fill out including new signature cards. Both Trustees will usually need to go in. CAUTION: Some banks want a death beneficiary to be stated on the account, in addition to putting the account into the name of the trust. In that case, be sure to have the trust as the death beneficiary.|
|Securities & Brokerage accounts||Contact the brokerage account and they will have forms for you to fill out and will want similar information that the banks will want. CAUTION: Some securities & brokerage companies want a death beneficiary to be stated on the account, in addition to putting the account into the name of the trust. In that case, be sure to have the trust as the death beneficiary.|
|Stocks & bonds held in your name||For stocks and bonds which you hold individually (i.e. not held in an account with a stockbroker) you will need to contact the stock transfer agent for that stock and they will in turn have forms for you to fill out so the stock or bond certificates can be reissued in the name of the trustees of the trust.|
|Motor vehicles & boats||Typically people do not transfer their motor vehicles into their trust, especially if there are 2 trustees (husband and wife). Just make sure that both names are on the DMV ownership title papers so that either one can sign if something happens to the other. Thus, wording should be “Joe Smith OR Jane Smith” to allow either one to buy or sell.|
|Valuables and Jewelry||A “Bill of Transfer” is written up describing the articles in question and stating that they are being transferred to the Trust. Both the Trustors and Trustees need to sign.|
|LLC interests||Limited Liability Company ( LLC) shares are not typically registered with any government agency or transfer agent. To transfer ownership, the Operating Agreement of the LLC needs to be amended to put the Trustees of the Trust on as substituted LLC Members (owners). All of the LLC Members would have to sign the amendment to give their permission to the ownership transfer into the Trust. The Trustors and Trustees of the Trust would also have to sign.|
|Closely held corporations
|Shares of stock in closely held corporations that are not registered on any stock exchange are transferred by the Trustors and Trustees signing assignment of share documents and by also having new stock share certificates prepared. Also, the other stockholders may need to sign and approve if there is a shareholders’ agreement with restrictions on transfer. The legal counsel and CPA for the corporation need to be consulted before any transfer to make sure the proper documentation is used and to make sure the transfer doesn’t create tax problems.|
|Partnership interests||Transfer of a partnership share into your Trust would generally require an amendment to the Partnership Agreement and the consent of the other partner or partners.|
|Unincorporated businesses||Shares in unincorporated businesses and sole proprietorship businesses would require some type of written transfer document signed by the Trustors and the Trustees. The assets involved would have to be determined and perhaps more than one document would be needed.|
|Life Insurance||You may or may not want to transfer life insurance ownership and/or the beneficial interest payable on death into the Trust. There are tax and other considerations to discuss with legal counsel before doing this.|
|Pension, IRA & 401(k) plans||These will pay off on death according to the beneficiary designation forms. You may or may not want the trust to be the beneficiary. As with life insurance, there are tax and other issues to discuss with legal counsel before doing this.|
|Casualty and liability insurance||You should inform all of your insurance companies about any assets transferred into your Trust and ask that the Trustees of the Trust be named on the policy as “additional insureds ”. Failure to notify the insurance companies may void the insurance and/or result in the insurance companies denying insurance claims.|
WARNING: This Memo contains generic instructions and is not to be relied upon for specific transactions. Individual situations can vary, depending upon the documents involved. Except for transferring of bank accounts and securities accounts in to the trust, legal counsel needs to be consulted to make sure the transfer documents are legal and fit the circumstances.