Issue 37.14
You created a trust to avoid probate and facilitate the administration of your estate. This is a good decision. However, it is critical to know that trusts only avoid probate if your assets are transferred into the trust. This process of transferring assets to the trust is called funding the trust.
The type of asset determines the method of transfer. If you think in terms of how you obtained the asset, you will have a clue to transferring it. For example, you obtained your house when you received a deed. In order to transfer real estate to your trust, a deed is prepared from you, as the present owner, to you, as the trustee of your trust. Once the deed into the trust is recorded, the transfer is complete. Let’s look at some other common assets and see how they are transferred to your trust:
1. Motor vehicles – re-title the vehicle in the name of the trust (note however that in many states including Utah, Nevada and Arizona, motor vehicles can usually be transferred upon death without probate).
2. Bank accounts, including CD’s – a change of name form is filled out at the bank or credit union.
3. Savings bonds – special forms are provided by the Federal Reserve or your bank.
4. Stock certificates – the transfer agent for the stock is contacted and a change of name form is completed. A signature guarantee may be required.
5. Brokerage accounts – similar to individual stock.
6. Personal property – a document called an assignment or bill of sale is executed that transfers all categories of personal property that do not require special treatment.
7. IRAs and other “Qualified” money – never transfer OWNERSHIP of this type of account to your trust. Transferring ownership would trigger all taxes and penalties that result from withdrawing this special asset. Rather than transferring ownership the beneficiary designation(s) may need to be changed.
Note: If you have accounts or policies with beneficial designations, IRAs, life insurance, annuities, etc., make sure that the designations are consistent with your current estate plans as they will control where that property goes.
Some of the assets you transfer to your trust will be covered by one or more insurance policies. For example, your home is usually covered. The insurance company should be notified to add the trust as an “other insured.”
Just keep in mind that a little paperwork is required to fund your trust. Once your trust is fully funded, future additions will be relatively simple.
Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona. He is a shareholder at the law firm of Barney & McKenna, with offices in St. George and Mesquite. He is the former President of the Southern Utah Estate Planning Council.