Transferring Assets to a Living Trust

This step is crucial because if not done prior to an incapacitation or your passing, some estate planning objectives may delayed or not possible, such as avoiding probate.

Living trusts typically contain a document assigning all personal property that does not have a title and is located in your home into your living trust immediately upon signing the documents. Every item does not need to be itemized. Examples of these items include:

• Clothing
• Electronics
• Furniture
• Jewelry
• Salt and pepper shakers

The assignment covers present and future property. A simple rule to remember: if you buy it from Target or Best Buy, the assignment of personal property likely covers it.

If you have specific items you would like to designate for a beneficiary, there are pages which allow you to handwrite and list items with their beneficiary.

Real Estate

To tranfer real estate into a living trust, a new deed must be prepared, signed and recorded showing transfer of title. At Four Peaks Planning, Inc., we will prepare any Arizona deeds requiring transfer.

For real estate outside Arizona, we have several sources listed on our Existing Clients page. Otherwise, contact a title company or realtor in that state for preparation and recording instructions. Real estate from multiple states can be placed into one Arizona living trust.

Transferring real estate into a living trust will not trigger any clause causing your mortgage to be due at once.

After-tax (Non-Qualified) Investments

Take or send living trust documents to your financial advisor. Your financial institution will copy documents and change ownership of the account to the trust's name. The financial institution will also take note of the successor trustees in preparation of the future when they show.

Bank Accounts

Once your living trust is signed and notarized, take all the documents to the bank. Let them choose documents they need for information/copies. You'll sign a few papers and the process rarely takes more than 15-20 minutes.

It is very rare for your account numbers to change. Most federal banks and credit unions let you keep the same account numbers. Direct deposits and automatic withdrawals aren't interrupted.

Some bank accounts transferred into a living trust are not able to be managed online. If that is the case, one option is leaving the bank account outside the trust, verify that your financial power of attorney will be accepted by the bank, and then list the trust as the TOD (transfer on death) or POD (payable on death) beneficiary. With a POD or TOD listed, the account will avoid probate.

If a co-signer is currently listed on the account, which can be the case with a elderly person and an adult child, banks will not let a co-signer remain on the account if being transferred into the trust. If the trustor wants to keep someone as a co-signer an option is to leave the account outside the trust, verify the financial power of attorney will be accepted and name the trust as a beneficiary via a TOD (transfer on death) or POD (payable on death).

Life Insurance

Like any other asset with a named beneficiary, life insurance will avoid probate if left completely outside a living trust. However, a primary objective for young families is controlling how and when life insurance is used. Hence, an option is to list the living trust as the beneficiary.

Rather than change the owner of life insurance, a simple change of beneficiary form can be often downloaded from the insurance company. A spouse can be kept as the primary beneficiary and the living trust listed as the contingent beneficiary.

When listing the living trust on the beneficiary form, if the trust is revocable list "(revocable)" after the trust name.

Pre-tax (Qualified) Investments - Retirement accounts: 401(k)s, IRAs, etc

These assets are typically left outside living trusts.

Transferring these accounts from your name to your living trust's name is akin to cashing out your retirement funds, which could cause a taxable event. If the retirement accounts list beneficiaries, the accounts will avoid probate.

IRS "stretch" laws allow beneficiaries to keep the money growing tax-deferred. Naming a living trust as the beneficiary can eliminate the "stretch" opportunity.

Consult your financial advisor and/or attorney before transferring retirement assets or changing beneficiaries to a living trust.

Savings Bonds

Paper bonds have to be mailed to the Treasury to reissue them in the trust name (see http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eereplace.htm).

Before doing this, consider converting paper bonds to digital bonds first (if that is desirable) so bonds will not need to be mailed to the Treasury twice. Digital bonds might make it easier for original and successor trustees to manage. To convert to digital bonds, see http://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm.
(Thank you to Angela B. for this information)