Transferring assets to your living trust

One of the primary purposes of drafting a living trust is to help your loved ones avoid probate after you’re gone. Assets held in a trust can bypass the long and burdensome probate process, making for an easier distribution to your intended beneficiaries.

However, just drafting the trust is not enough. You need to take the necessary steps to transfer ownership of your property into the trust. This is called “funding the trust.” Any assets you fail to transfer to the trust during your lifetime may end up in probate. Different types of assets are transferred in different ways. The following is not a step-by-step guide, but a general overview of the process for many common types of property.

Real Estate

Transferring real estate into a trust requires executing a new deed before a notary and recording it with the County Recorder where the property is located. In California, you must also file a “Preliminary Change of Ownership Report” indicating a transfer to a trust, in order to avoid a property tax reassessment.

If you have a mortgage, you generally do not need the lender’s consent to transfer residential property into your trust. However, it may be wise to ask the mortgage holder to approve the change of title and make sure the loan terms will remain the same. For a commercial property, you should obtain the lender’s consent to avoid an acceleration of any “due on sale” clause in your agreement.

Bank Accounts

Transferring savings, checking, money market accounts, or CD’s into your trust is usually fairly straightforward. You’ll need to contact your bank and cooperate with any requirements of the financial institution. They will usually need to see a copy of the trust, or a Certificate of Trust, to change the title on your accounts.

Corporate Shares and Other Business Interests

For privately held corporations, transferring your shares to your trust usually involves obtaining corporate approval, cancelling the old share certificates, and issuing new ones in the name of the trust. You should also execute an Assignment document, assigning ownership of the shares to your trust.

If you have stock in a publicly held corporation, you will have to work with the stockbroker through whom you purchased the shares. You may have to surrender the original stock certificates or provide a copy of the trust or Certificate of Trust.

Other business interests, such as an ownership interest in a limited liability company (LLC), can often be transferred by a similar “assignment to trust” document (with approval of the LLC, if necessary). You should seek legal and tax advice to determine the implications of transferring business interests to your trust.

Personal Property

Transferring personal property (such as household items, jewelry, automobiles, etc.) can be accomplished by signing an “Assignment of Personal Property” or similar document, declaring ownership of your personal property by the trust.

Life Insurance

You may decide to name your trust as the beneficiary of your life insurance policy. If so, you will need to contact your life insurance company to change the beneficiary designation to the name of your trust.

Other Property

These are common types of property that you might need to transfer into your trust (or have the trust listed as beneficiary). Other property might include:

  • Contract rights, deeds of trust, and other security interests
  • Oil, gas, and mineral rights
  • Safe deposit boxes
  • Retirement plans, such as an IRA or 401(k)
  • Intellectual property
  • Mobile homes

When drafting your estate plan, it helps to take an inventory of all your assets, so you can determine what needs to be transferred into the trust. Additionally, when you acquire new property, you will need to take title in the name of the trust.

It’s also important to consider tax and other implications of transferring property into your trust. For instance, if you’re married and want to transfer separate property into your family trust, you will need to designate it as separate property to maintain that designation. Talking to an experienced estate planning attorney, as well as your CPA, can help you work out all the details of your assets.

Helix Law Firm can draft your estate plan

We can help determine the best type of estate plan for your needs. If that includes a revocable living trust, we can draft all necessary documents and help make sure your assets are properly transferred.

If you’re interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.

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