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TRANSFERRING OTHER ASSETS
Transferring other assets
As noted previously, a revocable living trust document is like a fancy new fireproof and burglar proof safe. It is there to protect the contents of the safe from fire and burglars. If you don’t put anything in the safe, however, it is not of much use. The same is true with a living trust. It is a powerful document, but if you don’t retitle your assets in the name of the trust (i.e. put them in the trust) it loses most of its benefits.
In addition to retitling your home you should also retitle other major assets.
Two of the benefits of a revocable living trust are continuity of management and avoidance of probate. These benefits are available only as to assets that are held in the name of your Trust (i.e., in your names as the Trustees of the Trust). Each estate is different but the following are general guidelines regarding which assets should be transferred into your trust:
1. Automobiles
Because title to automobiles may be easily transferred after the death of the owner without the need for probate administration, it is usually not necessary to transfer ownership of your vehicles into your names as Trustees. (If you own a Classic 1948 Tucker or a Bugatti Veyron ($1,700,000) or a Ferrari Enzo ($1,000,000) however, that is a different story!)
2. Bank, Savings, and Other Cash Accounts
Up to a total of $100,000 of real or personal property can be held outside the Trust and avoid probate. This amount of property may be collected by affidavit 40 days after your death without the need for probate administration. Therefore bank and savings accounts don’t necessarily need be transferred to the Trust so long as the total of these accounts does not exceed the $100,000 limit. Nevertheless, since at sometime in the future they could exceed this amount, it is a good idea that all checking and savings accounts and money market accounts, certificates of deposit, and like accounts be transferred into the Trust. Banks make such transfers regularly and will usually handle the paperwork for you.
3. Life Insurance
a. General. Life insurance policies owned by you as your “community” property should name the Trust as beneficiary. Each spouse may be named as secondary beneficiary of life insurance policies on the other's life, so that if the Trust is not in existence at the first of your deaths, the proceeds will be payable to the survivor of you. Your insurance agent should be able to easily make these changes or provide you with the appropriate forms.
b. Separate Property. If either you or your spouse own life insurance as your “separate” property on the life of the other (which is not common), an automatic policy transfer arrangement should be made with the insurance company so that the Trust will automatically become the successor owner should the owning settlor die. If this is not done, probate administration will be required in order to transfer ownership of the policy to the Trust.
c. Other Considerations. If, in the future, your estate grows or the federal estate tax exemption decreases so that your estate will be subject to federal estate taxes, you should consider setting up a separate irrevocable life insurance trust (ILIT) and have it own your insurance policies. This would remove the insurance from your taxable estate, reduce your estate taxes, and let you leave more to your children. Most people are OK for 2009 and 2010 because the estate tax exemption limit is $3.5 million per person in 2009 and in 2010 there is no estate tax. In 2011, however, the exemption will be reduced to $1.0 million per person unless Congress changes it. You should reevaluate your situation in 2011 when it is known what action (or inaction) Congress takes.
d. Retirement [I.R.A.] Accounts. Your Individual Retirement Accounts should name each other as beneficiary in order to preserve maximum tax flexibility. Normally, your children should be named as contingent beneficiaries. Only in rare circumstances should the trust be named as beneficiary of your IRA.
4. Real Property
Your residence and other real property should be transferred into your Trust by the execution and recording of trust transfer deeds. Take a look at Transferring Real Estate Deeds for more information on this.
5. Stock/ Marketable Securities.
Marketable securities should be transferred into the Trust by your brokers. They may require a copy of some pages of the trust or other evidence of the existence of the Trust. They are familiar with living trusts and should be able to easily make the transfers you request. Your estate planning attorney can assist you if you have any problems.
One final point; even though your assets are titled in the name of the Trust, you still have complete control over them since you are the trustee. You can buy, sell or perform other transactions just as you have always been able to do.