On Behalf of | Mar 31, 2017 | Firm News
The primary purpose of having your assets in a living trust is to avoid the expense and delay of the probate process. Keep in mind that anything that you own which is not jointly held or in a revocable living trust at the time of your death will go through probate . Therefore, if you have created a revocable living trust by executing a trust agreement, the objective is to transfer the ownership of suitable assets into the name of the trustee of your living trust, so that these assets will not be involved in the probate process.
Your living trust can’t have any beneficial effects, if it is unfunded (empty). The trust can’t deal with property that it does not own. So, it is an essential step in making your trust effective to transfer ownership (title) of property to the trust’s name.
Most of your assets should go into your living trust. Any assets which are solely in your name, outside of your trust will be subject to the probate process. Transferring assets into your trust is usually very simple. Basically, there are two types of property that are transferred into a trust – property with ownership (title) documents and those without such title documents. Each type of property is treated differently when it comes to transferring it to your trust.
- Property Without Ownership (Title) Documents
Many types of property don’t have title documents, including all kinds of household possessions and furnishings, clothing, jewelry, furs, tools, farm equipment, antiques, electronic and computer equipment, art works, bearer bonds, cash, precious metals, and collectibles. Some estate planners suggest that you can transfer these items to the trust simply by listing them on a trust schedule and that no other action is needed. However, we recommend that such items be listed on a schedule attached to a transfer document such as a Bill Of Sale, which simply and legally formalizes the transfer. Enclosed is a Bill of Sale for you to sign when you come in to sign the deed to your house.
- Property With Ownership (Title) Documents
After your trust agreement has been signed, witnessed, and notarized, it is essential that you formally re-register the ownership of all items of property, that you want to transfer into your trust, which have ownership documents (title papers). Here is a list of some of the types of property which must have the title documents re-registered, if you want such property transferred into your trust:
(i) Bank Accounts
(ii) Business Interests
(iii) Motor Vehicles
(iv) Real Estate (Real Property)
(v) Stocks, Bonds, & Mutual Funds
Your trust won’t be effective for any property with an ownership document which is not re-registered in the trust’s name. The new document of title must show that the trustee – not you, the grantor – is the legal owner of the property. If the trustee isn’t the legal owner of the property, the trustee (and successor trustee) has no legal authority to deal with the property for the benefit of the beneficiaries and no authority to transfer that property to the beneficiaries as your trust directs.
If the title to property listed on the trust schedule remains in your name (you fail to re-register it to your trust), that property will pass under the terms of your will. Since it’s not usually specifically listed in your will, it will go to the residuary beneficiary, who, of course, may not be the person who you intended to receive it. Even if your residuary beneficiary in your will is your trust, that property will have to pass through the probate process. If you have no will, any property not transferred to your trust will be left under the terms of the state’s intestate succession law. In either case, it will be subject to all the expense and delay of the probate process – the very things you are trying to avoid.
Our firm can discuss how a living trust will help you make distribution of your assets after your death without going through probate, and can discuss how to fund the trust to make it effective. Contact us and arrange an appointment to discuss this important subject.