Transfer assets to your Trust
The Revocable (Living) Trust is a basic tool for modern estate planning. By using one, you can manage your assets during your life and pass them on at death without need of a court supervised, lengthy and expensive probate proceeding.
Please take this warning seriously. Many a person has taken the trouble and expense to create a Revocable Trust but then forgot to transfer their assets to it. With this additional step, the trust is of no value.
Remember, if there is a piece of paper that says who owns a particular asset, there has to be a new piece of paper saying that the trust owns it after the trust is created. Actually, the title is in the name of the trustee of the trust. For example:
John Jones, trustee of the John Jones Revocable Trust
Once the property is transferred to the trust, you do not need to create a new document simply because the trustee changes. Once transferred, the successor trustee will have ownership for the trust.
Transfers of property to your Revocable Trust will not cause the property to be reassessed. However, you must complete a "Preliminary Change in Ownership Report" and send it to the County Recorder along with each deed you record. These reports are required in order to avoid penalties. I will prepare one of these forms for each of the deeds which transfers property to your Revocable Trust. After the deed transferring your home to your Revocable Trust has been recorded, you should expect to receive an application for homeowner's exemption in the mail. You should complete this form and return it to the assessor's office to preserve your homestead exemption.
3 With regard to each piece of real estate you transfer to your Revocable Trust, you may want to review the title insurance policy associated with each such property to determine whether title coverage will continue after the property has been transferred to your Revocable Trust and subsequently, after your Revocable Trust terminates and the property is distributed to your beneficiaries (or to trusts for their benefit). To obtain coverage, it may be necessary secure an endorsement from the title insurance company, and an additional premium may be required. You should contact the title insurance company to determine whether any additional steps are necessary.
Casualty and Property Insurance
With regard to casualty and property insurance, you should consult with your insurance agent to make certain that transferring your personal property into your Revocable Trust will not result in a business rating on your insurance policy causing an increase in your insurance premium. Also, you should ask your agent if your policies need to be amended to include and cover your Revocable Trust and all of its property. Sometimes this can be accomplished by adding your Revocable Trust as an additional insured to your policy, and for automobiles owned by the Revocable Trust, listing you as an insured driver.
Stocks and Bonds Not in "Street Name"
Most often, stocks and bonds are held in "Street Name"
accounts, meaning the brokerage firm holds the securities in its "street name"
so it is easier for you to trade.
By changing the name on the account, you automatically change the beneficial
ownership of all the securities in that account.
However, many people hold the actual stock or bond certificates, and in
such a case, it will be necessary to place the securities into a brokerage
account in the name of your Revocable Trust or to re‑register the securities so
that they are in the name of your Revocable Trust.
Most often, stocks and bonds are held in "Street Name" accounts, meaning the brokerage firm holds the securities in its "street name" so it is easier for you to trade. By changing the name on the account, you automatically change the beneficial ownership of all the securities in that account. However, many people hold the actual stock or bond certificates, and in such a case, it will be necessary to place the securities into a brokerage account in the name of your Revocable Trust or to re‑register the securities so that they are in the name of your Revocable Trust.
Closely Held Corporation Stock
If you own an interest in a closely held corporation (generally, a corporation that is not publicly traded), then it will be necessary to sign a Stock Assignment form and issue a new certificate in the name of your Revocable Trust. Often, the assignment language is found on the back side of the stock certificates. If you want me to assist with any such transfer, please provide me with your corporate record book and the relevant stock certificates.
It may be the case that a buy-sell agreement is in place restricting the transfer of shares of stock you own in a closely held corporation. Most of the time, a buy-sell agreement will permit the transfer of closely held stock to a trust established for the benefit of the shareholder making the transfer. Even so, you will want to determine if a transfer to your Revocable Trust is permitted. If the buy-sell agreement does not permit any such transfer, then it will be necessary to amend the agreement or obtain the consent of the other shareholders.
If a closely held corporation in which you are a shareholder has elected to be treated as an "S Corporation," the transfer of your shares to your Revocable Trust will not affect that election since your Revocable Trust is a "grantor trust" for income tax purposes. You will still be treated as the direct owner of the shares even if ownership is transferred to your Revocable Trust.
If you are a partner in a general partnership or limited liability company, you should contact the partner or member who manages the company and request that your interest be transferred to your Revocable Trust. Just as with an interest in a limited partnership, it may be necessary to obtain the approval of some or all of the other partners or members before you are permitted to assign your interest to the Revocable Trust. The general partnership or LLC may be able to provide you with the proper assignment form, but if they are not able to do so, please contact me. Upon receipt of a copy of the entity's agreement, I will prepare an assignment form for you.
Bank, Savings and Other Accounts
You must change the name on each bank, brokerage, money market, credit union, or mutual fund account (referred to in this Section as an "account" or as "accounts") that you wish to be owned by the Revocable Trust. However, under California law, each person may have up to $100,000 of real or personal property in his or her own name upon death and still avoid probate. This amount of property may be claimed by affidavit 40 days after death without the need for a probate administration. Accordingly, it is not necessary that all of your accounts be transferred to the Revocable Trust, as long as the total amount of property outside the trust is less than $100,000. It is possible, though, that you may become incapacitated or disabled, and any property outside the Revocable Trust would need to be handled by an agent acting under a power of attorney. This may not be in line with what you desire. It is possible as well that the power of attorney may not be accepted by a bank or brokerage house or that all agents named in the power of attorney will be unable to serve, and in such case, a court order would be needed to access the funds. It is advisable, therefore, that all of your accounts be transferred to the Revocable Trust.
New account cards should be completed at each financial institution changing the current owner of the existing accounts to the Revocable Trust. With regard to accounts which have checking privileges, it may be possible to retain your existing checks which list your name on the face of the check, provided the ownership of the account is properly changed. I recommend that you check your account statements from the various institutions to verify that they reflect your Revocable Trust as the proper owner. The following is a summary of the steps you must take to transfer ownership of accounts to your Revocable Trust:
2. Ask to have the title on your account(s) changed to the name of your Revocable Trust. If your Revocable Trust names more than one trustee, you should point out that any one Trustee may transact business on behalf of the trust alone, and therefore, the signature cards should only require one signature for bank transactions. If the bank permits it, ask to keep the same account numbers on your account(s). Also, request that your checks remain printed as they are and not in the name of your Revocable Trust. Having the name of your Revocable Trust on your checks will not cause you any difficulties, but it will mean that persons or businesses to whom you write checks will know you have a Revocable Trust.
3. The bank may want a copy of your Declaration of Trust. If so, tell them you would prefer instead to give them a copy of your Certification of Trust which shows the proper name for the account and that the Trustees have authority to open this type of account in the name of your Revocable Trust. The bank may not accept the Certification of Trust, but may instead require a copy of the Declaration of Trust. You should then ask them to accept only the first page and the last two pages, as the other pages are of a personal nature. If they still insist on having a copy of the entire Declaration of Trust, you can either provide it to them or find a different bank which does not have a similar requirement.
4. Sign the new signature cards. (You should not have to use the word "Trustee" as part of your signature.)
1. If you have a bank account at a financial institution out of town, send them a Memorandum Requesting Transfer of Account to Your Revocable Trust along with a copy of the Certification of Trust. Note though, some institutions may not accept the Certification of Trust and may want a copy of your entire Declaration of Trust. If you are asked to provide a copy of the entire Declaration of Trust, ask them if they will accept only the first page and the last two pages, as the other pages are of a personal nature. If they still insist on having a copy of the entire Declaration of Trust, you can either provide it to them or find a different bank which does not have a similar requirement.
2. When you receive the new signature card in the mail, make sure the Revocable Trust is properly listed as the owner, and sign it and send it back to the institution. (You should not have to use the word "Trustee" as part of your signature.)
3. If you have a brokerage account which is held by a firm whose offices are out of town, you should call your broker's toll free number to find out exactly what steps you must take. It will likely be necessary to have your signature guaranteed and that can be accomplished at the offices of most major brokerage firms or at certain commercial banks or trust companies. Call your local bank or brokerage firm to see if they provide this service. It is best to have a "Medallion" guarantee instead of a regular guaranteed signature. The brokerage firm will tell you what other forms will be needed in addition to the signature guarantee.
What if the Bank or Credit Union Will Not Allow Revocable Trust Accounts?
Some banks and credit unions do not allow their customers to open Revocable Trust accounts. Often the problem is that the person you are talking to does not realize the bank really does allow you to have a trust account, so the solution may be as simple as talking to another more senior person at the bank. If it turns out that you are definitely not able to have a trust account, you can either open your account at a bank which does offer trust accounts, or you can set the account up as a Joint Tenants With Rights of Survivorship account or as a Payable on Death account so that the account will pass directly to the surviving joint tenant or to the named beneficiary without having to go through probate. Of course, if an account does pass directly to a person, it is possible that the planning contained within your Revocable Trust may be nullified or disrupted.
Certificates of Deposit:
Most, but not all, financial institutions will change the certificate owner to a Revocable Trust without a penalty. If your financial institution will impose a penalty, you may want to wait until the certificate of deposit matures before changing it to your Revocable Trust. In addition, you should check with each of your financial institutions to make certain that all of your certificates of deposits have been properly styled in the name of your trust in a manner that will qualify for FDIC or FSLIC insurance coverage.
You may own rental properties which you will transfer to your Revocable Trust. In such a case, you should explain to your tenant that you have assigned the property to a trust and that all future payments should be made to the trust. You may even want to amend your lease agreement with the tenant. (Of course, all future leases should reflect the Revocable Trust as the landlord.) There is no need to send any portion of your trust document to the lessee. If the next rent payment you receive is made out to your Revocable Trust, you will know your tenant has received your letter and understands what needed to be done. If the next rent payment is made out to you personally, you should contact the tenant one more time and ask that future payments be made out to the trust. Note, there is no real problem if the tenant continues to make payments to you personally. Rent checks received by you personally can be deposited into a Revocable Trust checking account.
If you own any mineral interests, the record titleholder of such interests (e.g., royalty interests, working interests) needs to be changed to your Revocable Trust. I recommend that you assign your mineral interests into your Revocable Trust and obtain transfer orders and/or division orders from the purchasers of the production. The assignments should be filed in the counties where the properties are located and the division orders should be signed and sent to the oil companies. However, this task exceeds the scope of our initial engagement. I recommend that you consult with an oil and gas attorney to ensure that such assignments are properly made. Depending upon the location of the mineral interests, I may be able to recommend an attorney to you.
If you already have existing promissory notes which are payable to you personally, they should be endorsed or assigned to your Revocable Trust, and the party making the payments should be notified of the assignment with the request that future payments be made to the Revocable Trust. If there are any real property liens securing the payments of these notes, the liens should also be assigned to your Revocable Trust, and evidence of such assignment should be filed of record in the county in which the property is located. In the future, if you should loan money to anyone, or if you sell property and the borrower or buyer gives you a promissory note for the purchase price, have that person make your Revocable Trust the "payee."
It is generally not necessary to transfer ownership of your automobiles, recreational vehicles, and boats (referred to in this paragraph as "vehicles") to your Revocable Trust. Transferring title to vehicles can be accomplished easily after death without the need for probate. Nonetheless, if you desire to transfer title to your vehicles to your Revocable Trust, then you should either seek assistance from the California State Automobile Association or the Southern California Automobile Association, or you should visit a local Department of Motor Vehicles.
Each private club will have its own rules regarding the transfer of a membership to a Revocable Trust. Some clubs have their own forms to accomplish the transfer, while other clubs do not allow a Revocable Trust to own a membership interest (although they may have a transfer on death agreement which accomplishes the transfer of any value to your Revocable Trust upon death). You should contact your club's membership director to find out what steps must be taken to transfer your membership to your Revocable Trust.
The trustee of the Revocable Trust should usually not be named either as the owner of the life insurance policy or as its beneficiary. Remember that transferring an insurance policy to your Revocable Trust does not alter its status for purposes of estate tax computation. The payoff value of your policy is included in your estate in calculating its size under federal estate tax laws. You can remove it from your estate by transferring all incidents of ownership to a person not under your control. I urge you to discuss this with your insurance agent or a trained professional.
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