Richard Morgan, Morgan and DiSalvo.
We just went over why you would choose a revocable living trust over a will, the benefits it provides. We then went over to the extent you want to achieve those benefits, to what extent you need to put assets in the trust while you’re alive to fund the trust while you’re alive to get those benefits. Now the question is if you chose a revocable living trust as your main document and you need to put assets in your trust, how do you physically do it? What is the process of funding your trust? It depends on the type of asset we’re talking about.
Number one, real estate. The way you transfer real estate anywhere in the country is you have to do a deed, a real property deed, that is almost always done by an attorney. Even in some states where it’s not required, I would highly recommend you do a deed. If you have a choice, you would rather do a full warranty deed or limited warranty deed rather than a quick claim deed to avoid issues with title insurance issues. Not really a part of this newsletter, but that’s highly recommended.
Number two. Now, some assets are not actually be transferred. You’re going to deal with beneficiary designations because you don’t really want to transfer them while you’re alive but effectively get the same effect. IRAs and qualified plans, you do not move those while you’re alive because that’s an income taxable event. You get a change of beneficiary form and you put in a proper beneficiary designation. This is an area that great care is needed because it has significant income tax effect, so you want to make sure you get good advice in doing that beneficiary designation. Bank accounts and brokerage accounts, you have a choice. You can go to the bank or brokerage account where you’re at. You tell him, “I have a revocable living trust. I want to put these accounts, assets into that trust,” and they will have two options for you. They’ll give you two options, potentially.
Number one, you keep the same account number, you have the same social security number as the tax ID number, and they just change the name on the account. The other option is they will set up a brand new trust account, same social security number as the ID number, and then they transfer the assets from your current individual account into the trust account.
Another way to do that is instead of moving the account, you could, depending on your estate plan, put in a beneficiary designation, either called a POD or TOD, paid on death or transfer on death. Different way to get to the same place, but possible.
Life insurance. Again, you probably aren’t going to change the ownership of the life insurance, but you will do a change of beneficiary form and have it go where you want it to go. Again, you need advice to make sure that’s done properly.
Closely held business interest, LLCs, S corps, C corps, partnerships, and alike, that will be a transfer and assignment type of document related to that entity. You’ll need to deal with corporate counsel, wherever the business attorney is, to make sure that it’s done properly. There’s probably going to be or potentially going to be a buy-sell agreement or an operating agreement that has restrictions and you need to comply with those restrictions in order to transfer it properly.
Annuities, again, you’re probably not changing the annuity ownership, but you’re going to change the beneficiary via a change of beneficiary form.
Lastly, tangible personal property. These are the kinds of assets that don’t have a place to register a title normally. Furniture, TVs, jewelry, computers, all those types of things. For those kinds of assets, you would do a general transfer and assignment form. For the types of assets that have places where you can register a title, like a car, potentially a boat, then you would go to the Department of Motor Vehicles or other proper place to register a title for that.
Richard Morgan, Morgan and DiSalvo.