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
Robert Olson is the lead attorney at DIY Lawyer. A website dedicated to helping people do their own legal work including drafting a Living Trust. They offer an e-book with a money back guarantee titled the Living Trust Annotated. This book teaches you to draft your own Living Trust for a fraction of what you would pay an attorney. With the purchase of the e-book you also receive a free half hour phone consultation with a DIY Lawyer to answer your questions about the book. You can read about it at DIY Lawyer's Living Trust Annotated.
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