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TRANSFERRING ASSETS INTO A LIVING TRUST

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CHANGING OWNERSHIP TO THE TRUST

When you transfer assets into a living trust you are changing legal ownership of your assets from your name to that of the trust. Most people create a living trust with themselves as trustee, so you will still be able to use and control your assets, but they will technically be owned by the trust. When funding a living trust, ownership will be transferred from you to (Your Name), Trustee of the (Your Name) Living Trust. Note that items in the trust will continue to use your Social Security number. Make a complete list of the assets you want to transfer so that you are sure you don’t leave anything out.

TRANSFERRING REAL PROPERTY TO YOUR TRUST

One of the largest assets most people own is their home and this is likely an asset you want to be sure to transfer into your trust. You can transfer your home (or any real property) to the trust with a deed transfer, a document that transfers ownership to the trust. A quitclaim deed is the simplest method, however a warranty deed may be preferred, since it ensures you have good title when you transfer it and makes it easier for your trust beneficiaries to sell at a later time. You will want to check with an attorney about which type of deed is best in your situation. Once the deed is prepared, a real estate deed transfer must be filed with your county and you will likely need to pay a filing fee.

A deed transfer should not affect your mortgage, even if you have a due on sale provision. You should check with your title insurance (if you have any). You may be able to simply transfer it to the trust, or your title insurance company may require that the trust buy a new policy. Once the deed is transferred, you will need to change your homeowner’s insurance to indicate the trust as owner of the property. If you receive a real estate tax exemption, you will want to make sure that is transferred and you may need to show documentation of the trust to the taxing authority, such as a certificate of trust (a document your attorney can create that certifies the existence of the trust).

DRIVE THE CHANGES HOME

If you would like to transfer ownership of your car or truck to your trust, you need to first determine if your state will allow a trust to hold ownership of a vehicle (check the DMV web site or consult your attorney). You also should call your insurance company to be certain they will continue coverage once the transfer is made. To transfer ownership, you will need to obtain a title change form from your DMV and complete it, naming the trustee (as trustee of your trust) as new owner. Sales tax should not apply to the transfer. If the clerk tries to apply it, you may need to speak to a supervisor. Note that owning a vehicle in the name of a trust can be detrimental if you are in an accident. The other person may assume you are wealthy if they realize your car is owned by a trust and sue. If you own a boat, you will need to follow a similar procedure to transfer title.

BIG FINANCE

To transfer assets such as investments, bank accounts, or stock to your living trust, you will need to contact the institution and complete a form. You will likely need to provide a certificate of trust as well. You may want to keep your personal checking and savings account out of the trust for ease of use.

OTHER PERSONAL PROPERTY

You likely own many things that you don’t have actual written titles or ownership documents for, such as jewelry, furniture, collectibles, and the miscellaneous things that fill your home. To place them in your living trust fund, you can name them in your trust document on a property schedule (basically a list you attach to the trust document that is referred to in the document) and indicate that their ownership is being transferred to the trust. If any of these items are insured, be sure to transfer the insurance to the name of the trust.

ITEMS NOT TO BE TRUSTED

There are some things that cannot or should not be placed in your trust. Individual Retirement Accounts (IRAs) cannot be owned by a trust, so these must remain in your own name. In some states life insurance policies cannot be owned by a trust, and if it is allowed it generally is not advisable since it may make the benefits taxable.

COVERING ALL YOUR BASES

If you purchase or inherit items after you create the trust, you will need to transfer those items to the trust as soon as possible. If possible, when you purchase items, purchase them as trustee of the trust so they are automatically placed in the trust. To further protect yourself, you will want a pour over will. This last will and testament can be prepared by your attorney and will indicate that any items left in your name are transferred to the trust upon your death, so that your trust will be complete and provide all the benefits you intended.

Double check your list of assets to be certain you have moved them all to your trust. Ensuring that your living trust is properly funded will provide you with the protection you seek as well as the peace of mind that your affairs are in order.

WFB LEGAL CONSULTING, INC.–LAWYER for BUSINESS

A BEST ASSET Protection Services Group

INTERACTION BETWEEN SPENDTHRIFT & DISCRETIONARY TRUSTS TO OBTAIN BEST ASSET PROTECTION GOALS

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A spendthrift trust is a kind of trust that limits or altogether prevents a beneficiary from being able to transfer or assign his interest in the income or the principal of the trust.  Spendthrift trusts are sometimes used to provide for beneficiaries who are incompetent or unable to take care of their financial affairs.

If a trust incorporates a spendthrift clause, the beneficiary is precluded from transferring his interest in either income or principal. Accordingly, the beneficiary’s creditors will not be able to reach the beneficiary’s interest in the trust.

The protection of the spendthrift trust extends solely to the property that is in the trust. Once the property has been distributed to the beneficiary that property can be reached by a creditor, except to the extent the distributed property is used to support a beneficiary. If a trust calls for a distribution to the beneficiary, but the beneficiary refuses such distribution and elects to retain property in the trust, the spendthrift protection of the trust ceases with respect to that distribution and therefore the beneficiary’s creditors can now reach trust assets.

A trust is called “discretionary” on the other hand, when the trustee has discretion (as to the time, amount and the identity of the beneficiary) in making distributions. Because the trustee is not required to make any distribution to any specific beneficiary, or may choose when and how much to distribute, a beneficiary of a discretionary trust may have such a tenuous interest in the trust so as not to constitute a property right at all. If the beneficiary indeed has no property right, there is nothing for a creditor to pursue. The statutes that follow this line of reasoning essentially provide that a trustee cannot be compelled to pay a beneficiary’s creditor if the trustee has discretion in making distributions of income and principal to begin with.

If the trustee of a self-settled trust (where the creator of the trust is also a beneficiary of the trust), has any discretion in making distributions, then the creditors of the settlor (creator) may reach the maximum amount that the trustee may distribute in his discretion to that particular settlor-beneficiary.

WFB LEGAL CONSULTING, Inc.

A BEST ASSET PROTECTION SERVICES GROUP

 

 

WHAT ARE THE REAL ADVANTAGES OF A LIVING TRUST?

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Living Trusts

Over the last two decades, the popularity of Living Trusts has skyrocketed. No longer are a tool just for the rich, Living Trusts one of the most common estate planning tools in use today. In fact, today’s estate planning is not just about death and taxes, but includes protection of one’s assets from the potential claims of creditors as well as personal income tax planning. This legal arrangement, usually drafted by an estate attorney, creates a separate entity called a Living Trust. A Living Trust is called that simply because it is created while you’re alive (as opposed to a “testamentary” trust created after death).

The Parties Involved The Living Trust document itself names three different parties. The individual (or couple) that establishes the Trust is named the Grantor (also referred to as the Trustor). The Trustee is the person named by the Trust as the controller of the Trust’s assets (and in many cases, the Trustees are the same people as the Grantors). On the receiving end, the Beneficiaries are the heirs that will benefit from the Trust once the Grantor’s have passed away.

Who Needs A Living Trust? Almost anyone with an estate of $100,000 or more can benefit from having a living trust. Estates of $100,000 or more are often subjected to probate in their state of residence, which can cost anywhere from 2%-4% of the estate’s value in court and legal fees. The living trust also is useful for individuals subject to estate taxes. Through a living trust, a couple is able to maximize their Unified Credit to its fullest. It even accomplishes protection for individuals wanting to avoid conservatorship. Advanced living trusts can be structured for complicated family situations. Re-married spouses, with children from a previous marriage, can use an advanced revocable trust to ensure kids receive their proper inheritance.

Avoiding Probate Living Trusts avoid probate, since they are completely private. Because a trust is recognized as a separate legal entity, distributions can be made by a Trustee to named beneficiaries without any involvement from the courts. The courts maintain no control over the Trust’s assets, and do not tie up the assets in a lengthy (and costly) probate process. The Trustee simply distributes assets to named heirs, but only if those assets have actually been placed inside the Trust.

Funding Your Living Trust Once established, almost anything can be placed in a trust: savings accounts, stocks, bonds, real estate, life insurance, and personal property. In “funding” the trust, you simply change the name or title on your assets to the name of your Trust. Many people worry about losing control of assets; however, that is not the case within a carefully-constructed Living Trust.

Always There for You Because the Trust is essentially controlled by one individual (the Trustee), that person can carry out your wishes when you’re not able to. For instance, if you have children from a previous marriage and wish to leave them an inheritance, specific instructions to the Trustee will ensure that they receive what you had requested. If you’re institutionalized or unable to care for yourself anymore, the Trust can still function and make distributions as needed. The Trustee has a fiduciary responsibility to see that your requests are fulfilled exactly. He or she can even provide care and protection for disabled relatives or handicapped children in accordance with your wishes.

Reducing Estate Taxes The Living Trust also minimizes estate taxes by fully utilizing every individual’s Unified Credit. The Estate Tax Credit, as mandated by Congress, currently shelters up to $5.43 million from estate taxes. With only a will in place, a married couple will receive a single $5.43 million exemption. However, if a Living Trust with “A-B Provisions” is in place and one spouse dies, the Living Trust separates into two separate trusts (commonly referred to as an A-B Trust).

In an A-B Trust, each of the two separate trusts receives its own $5.43 million exemption, meaning a total of $10.86 million is sheltered from estate taxes. Any amounts over that $10.86 million will be subject to estate taxes, with rates climbing as high as 46%. Living Trusts are easy to start-up and require little on-going maintenance. They afford an extra measure of protection against loss of control, and ensure that your assets remain out of the public record even after your death. However, they do not provide protection against creditors or divorce, and do not reduce estate taxes for estates over $5.43 million in value ($10.86 million if married). Each family’s situation is different. Some will benefit from a living trust, while others may not. If you are married or have assets over $100,000, you owe it to your family to investigate the best means to preserve your hard-earned wealth. And for estates over $5.43 million, you may want to combine a living trust with another advanced estate planning technique.