So you have just left your attorney’s office with a shiny new Trust. Your attorney tells you that this Trust avoids probate, reduces your taxes, and organizes your assets. You get home and put it on the table. Now what?
The one thing you do not want to do is put the Trust away and forget about it. Trusts need love and care, or else they will not help you. Typically as part of the estate planning process, your attorney will provide you with written instructions concerning how to fund your Trust and, in the case of a married couple with two Trusts, which assets should go in which Trust. There is no drawback to funding your Trust; your taxes do not change and you will not lose control if you are the Trustee. funding a trust funding a trust funding a trust funding a trust
Below is a review of how to take care of your new Trust!
1) Fund Your Trust:
Trusts don’t fund themselves and the mere existence of a Trust does not mean your assets automatically become part of a Trust. “Funding” a Trust means changing the name on a bank account, real estate, or stock account to reflect the name of the Trust. In addition, changing the beneficiary of a life insurance policy or annuity to the name of your Trust is also considered funding a Trust. So instead of a bank account in the name of “Jane Smith,” the bank account will read: “The Jane Smith Trust, Jane Smith, Trustee.”
2) Steps to Funding a Trust:
A) Bank accounts, CDs, money markets, etc: Bring a copy of your Trust to your bank and ask the bank to change the name on the account. In many cases, the bank will want to close your old accounts and open new accounts in the name of the Trust.
B) Real Estate: Your attorney will prepare a new deed for you to sign in which you, as the current owner, deed the house to you (and/or other Trustees) as Trustee(s) of your new Trust. The deed is recorded at the Registry of Deeds along with a Trustee Certificate.
C) Stock funds, investment accounts, and mutual fund accounts: Contact your financial advisor or the financial institution directly and inform them of your intentions. The financial institution will send you paperwork to complete and send back with a copy of your Trust.
D) Individual Stocks: If you have a financial advisor, he or she may be able to help. Otherwise, you need to determine the transfer agent for the company. For example, Verizon stock has Computershare as its transfer agent. The Computershare website has forms you can fill out and mail in to change the name on the stock certificate or stock account. Other transfer agents include Wells Fargo and American Stock Transfer.
E) Life Insurance: Your attorney may advise you to change the beneficiary of your life insurance to the name of your Trust. It is important that you name the Trust correctly on these forms, so it is best to work with your attorney. You can go to the website for your life insurance company, and print out the Change of Beneficiary Form, or you can call and ask the company to mail you the form. Bring the form to your next meeting with your attorney. Be sure to keep a copy of the form.
F) Retirement Funds such as 401Ks, IRAs, etc.: Retirement funds can not be owned by a Trust. Occasionally, your attorney may advise you to change the beneficiary of your retirement account to be your Trust, although typically these accounts are left to a beneficiary such as a child or spouse. In some special circumstances, such as a disabled child, your attorney may set up your Trust so that your retirement can flow into the Trust for the benefit of the disabled child. Do not make this change without the specific advice of your attorney!
G) Out of State Real Estate: We strongly advise that you change the deed on your out of state rental property or vacation property to your Trust so that you avoid probate in two states.
If you have questions on any of the above, especially funding a trust, ask your attorney for help.
3) Keep Your Trust Up to Date:
Take a look at your Trust every few years. Have there been any significant changes in your family which should be reflected in your Trust? Are the persons you named as your Successor Trustees still willing and able to serve? Perhaps your children are old enough and experienced enough that you want to name them as Trustee or Successor Trustee. Perhaps your children were young when you set up the Trust and now you should update the distribution provisions.
A) If you need to make changes, your attorney can draft an Amendment for your Trust. An Amendment is a change to certain terms in the Trust. For example, let’s say you want to change your Trust so that your children receive their share of your estate immediately at your death rather than holding it in a sub-trust until they reach age 40. Your attorney can draft an Amendment changing the provision concerning payments to your children. Since an Amendment makes a change to only one or two provisions in the Trust, the rest of the Trust provisions remain as they were drafted in the original Trust. Therefore the original Trust and the Amendment must be kept together at all times and read together.
B) If you have made several Amendments over the years, it might be time for a Restatement. A Restatement is a total Amendment of the Trust and it results in a new, fully updated Trust with all the amended provisions included.
4) Keep Feeding Your Trust.
If you acquire a new asset, such as a vacation property or open a new bank account, discuss with your attorney if you should put the name of the Trust on the new asset. It is always wise to check with your attorney, particularly for a married couple, to get advice concerning which Trust should hold the real estate.
Assets in your Trust at the time of your death avoid probate. Your Successor Trustee will be able to manage your finances more easily if they are part of your Trust. Be sure you are utilizing your Trust’s full potential to save time and money!