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FUNDING
A LIVING TRUST
By Douglas R. Jackson, Attorney at Law
Many people considering a Living Trust ask whether it should be funded
during their life times. The answer, in the vast majority of cases, is
Yes! Some of the important things that a fully funded Living Trust can
accomplish are the following: avoid Probate expenses and delay for assets
titled to the trust, avoid Probate in another state if assets are titled
to the trust and there is property owned in another state, allow successor
trustee to handle finances in event of incapacity or incompetence of grantor(s)
(people who made trust), succession planning for closely held business,
provide for division of assets of married couple if estate is greater
than $1,000,000, and bring together all assets in an organized manner.
Real estate should be titled to the trust, and an attorney must make the
deed. The deed should be recorded in the County in which the property
is located. Out of state property, including vacation houses, time-shares,
etc. should also be recorded. Homeowner insurance companies should be
notified, and the trust should be listed as an additional insured. Transfers
to the Living Trust are exempt transfers. Oil and gas interests may also
be assigned to the trust.
Automobiles, RV's, boats, etc. may be titled to the trust. It may be better
to do so after the first spouse dies due to the recent change in Ohio
law which permits the surviving spouse to take (2) vehicles in his/her
name outside of Probate if the value is less than $40,000.00. Other personal
property may be transferred to the trust by means of a properly executed
Bill of Sale, which generally assigns all furniture, appliances, jewelry,
clothing, household items, etc. to the trust.
Bank accounts, money market accounts and Certificates of Deposit may all
be titled to the trust. Re-titling these assets to a trust does not cause
any early penalty withdrawal penalties, since, in most instances, these
accounts are still reported for income tax reporting purposes under the
Social Security Number of the grantor (maker of the trust). Banks permitted
to sell securities, brokerage firms, and transfer agents easily transfer
publicly traded securities to the trust. In most cases, a copy of the
trust or certificate of trust must be presented with the stock certificates
to transfer. A signature must be guaranteed by what is referred to as
a Medallion Guarantee on the back of the Certificate. Brokerage accounts
at stock brokers should be retitiled to your trust; an example: John L.
Smith, Trustee(s), or Successor Trustee(s), of the John Smith Trust dated
December 1, 1998.
Closely held business interests may also be transferred to the trust.
A Limited Partnership, General Partnerships, and Professional Corporation
shares may also be transferred to the trust. It may be necessary, however,
to secure the permission of the partners or corporate officials prior
to such a transfer.
Who should fund the trust? In most cases, the individual should consider
funding the trust himself/herself with some assistance from his/her attorney.
Be careful of revealing your account numbers to strangers. Most attorneys,
for liability reasons, will draft letters of instruction to banks/credit
unions, stockbrokers, financial planners, life insurance agents, and retirement
account IRA or 401(K) administrators for you. The listing of account numbers
on this letter is then done by you. The attorney will spell out the appropriate
"owner" or "beneficiary" designation on these letters.
Verification of transfer to the trust should be done in about 45-60 days
of delivery of this letter to the appropriate institution.
A funded trust is a definite advantage in the overall estate planning
process. Ongoing efforts to maintain funding should be done. Whenever
a new bank account or certificate of deposit, bond, or stock share is
purchased, title should be held by the trust. It is a good idea to maintain
a log of your trust assets so that your successor trustee is aware of
their location and account numbers.
Never accept documents drafted by a non-attorney, and always personally
meet with the attorney who drafts your documents. Execution, or signing
of your documents, should be at your attorney's office or in his/her presence,
if at all practical.
Douglas
R. Jackson is an attorney in practice with the law firm of Jackson &
Curtin Co., L.P.A. which limits it practice to Tax, Estate Planning, and
Elder law.
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