Funding Your Trust

When a Revocable Living Trust (Trust) is created, the Grantor/Settlor, i.e. the person creating the Trust, declares that certain property is going to be held by the Trust and managed by the Trustee .  In most cases, the person creating the Trust is both the Settlor and Trustee.  The process of putting property into the Trust is called “Funding” the Trust.  The purpose of Funding the Trust is to allow property management by a Trustee other than the Settlor i.e. after the Settlor dies.  The Trustee after the Settlor is called the Successor Trustee. 

If the Trust is not funded, the Successor Trustee may be unable to manage the Trust without obtaining a court decree declaring the trust property belongs to the Trust.  This can be a complicated process and the outcome uncertain.  In addition, if the Trust is not properly Funded, there may be disputes over ownership of assets.  Therefore, if you have Trust, now is the time to make sure your Trust is Funded.   

There are two parts to “Funding” the Trust.  First, the Trust needs to list the trust property and have language satisfying the requirement for a declaration that the property listed is to become Trust property as soon as the documents are executed.

The second part is making sure your Trust has legal title to your assets.  For bank accounts, this means you need to notify the Bank or Brokerage that you have a Trust and put the account in the name of the Trust.  For real property, the Settlor must execute a Grant Deed/Trust Transfer Deed showing the real property transferred to the Trustee of the Trust.  After it is executed and notarized, it must be recorded at the county recorder’s office in the county where the real property is located.  It is particularly important to check your documents if you have sold or refinanced any real property because the lender may have required the real property to have been deeded back to you from the Trust prior to a sale or refinance.  If that was the case, you need to make sure the real property is again put in the Trust.  If you have personal property of substantial value which is not titled already i.e. a car or boat, you may want to consider doing an Assignment of Tangible Personal Property to the Trust.

In conclusion, if you have a Trust, now is the time to review it.  Make sure that all of the assets you want in the Trust have been listed in the Trust.  Make sure that there is language declaring the assets are in the Trust.  Finally and most importantly, make sure there is recorded Grant Deed/Trust Transfer Deed for real property, Assignment of Personal Property for personal property and confirmation of bank/brokerage accounts are in the name of the Trust.    If you do not know whether your Trust is properly Funded, I see people for a free 30 minute consultation in my Walnut Creek and Brentwood offices.        

*THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN MAKING ANY DECISION REGARDING ESTATE PLANNING.  THIS INFORMATION IS NOT A SUBSTITUTE FOR OBTAINING TAX & LEGAL ADVICE REGARDING AN INDIVIDUAL SITUATION.   (925) 939-1680.     © 2014 Joan Grimes

Want to Save Money?

Consider a Revocable Living Trust,

A Revocable Living Trust (“RLT”) is a legal document created during your lifetime that allows you to leave your real and personal property to beneficiaries of your choice. A RLT is very much like a Will with one BIG exception: there is no Probate with a RLT. This means that your RLT and the property in it will not be made public or subject to court supervision.

Given the high cost of probate proceedings in California which can easily be 4-6% of the fair market value of the assets irrespective of the debt against the assets, this is reason enough especially if you own any real property. In most cases, the cost of transfer of title with a RLT is few hundred dollars. Also, there is a minimal time delay incurred in transferring assets to beneficiaries with a RLT because no court approval is required. In a probate, it can take years to transfer title.   

RLTs are called “living” because they are created while you are alive and you legally transfer your property to the trust when you create it. RLTs are “revocable” because you may at any time prior to your death, revoke or change them. In fact, as there are changes in your life including getting married, divorced, a beneficiary dies or your financial or property situation changes, you should have the RLT reviewed by an attorney in order to ensure the changes are properly reflected in the Trust.

While you are alive, you still own all of your property that has been transferred to the RLT. You can still sell the property in the trust, borrow against it, spend it or give it away. Assets in a RLT are treated much the same as direct ownership of property for income tax purposes. There are no additional taxes, tax returns or any necessity for separate tax payer identification.

Sometimes people say they are not concerned about probate fees because they are not going to be here. However, a RLT can be very important to you when you are alive because if you become incompetent due to an accident or illness, a conservatorship will be necessary if you do not have a RLT. However, if you a RLT, there can be an easy transfer of management of your property and affairs without the necessity of a court appointed conservator if there is a period of incapacity.

Sometimes people are worried that RLT will cost a lot of money and take a lot of time to set up and maintain. For most people, an Estate Plan including a RLT and all of the ancillary documents including a Power of Attorney and Healthcare Directive should not be a costly process. However, depending on your specific circumstances, it may be more costly.  Most attorneys allow people to make payments over time for the work. If you have separate property from a prior marriage or business interests that need to be included, it may be more, but then it is even more important that you properly plan for distribution of your assets in accordance with your wishes without the prying eyes of the public and court system. 

If you have real property in the state of California or elsewhere, you should carefully consider how you are currently holding title to the property and whether a RLT may be a better idea for you. I see people every day for a FREE 30 minute consultation in Walnut Creek and Brentwood.

This article provides only general legal information, and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680 1600 S. Main Street, Suite 100, Walnut Creek, CA 94513  © 2015 Joan Grimes