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  Scott H. Linden, Esq.
Attorney and Counselor at Law
Phone: (818) 968-6165
Fax:  (818) 479-9769

 

 

SPECIAL INFORMATIONAL BULLETINS:


Scott H. Linden, Esq.   Attorney & Counselor at Law  (818)968-6165

Transferring Assets to a Revocable Living Trust

INSTRUCTIONS

FOR

TRANSFERRING ASSETS TO TRUST

The material outlined in this brochure is to specify the method of transferring assets to your Revocable Living Trust. The name in which an asset is to be held has been provided to you previously; and, therefore, the material included here will relate to the most common types of assets that are to be held either in the name of the Trust or the Trust named as the Beneficiary.

All of the information contained in this instructional material may not apply at the present time or in the future; however, out of an abundance of caution, you should have the maximum amount of information available to you regarding the transferring of assets to the Trust or the naming of the Trust as Beneficiary in appropriate situations.

It is recommended that this instructional material be maintained for future use. In this way, you will have the information available to you to ensure that at the time a new asset is acquired, the acquisition can be made in the name of the Trust and in accordance with this information.

Above all, be sure to contact the firm of Schofield, Grossman & Linden, if the transferring of an asset appears to be presently unresolved in any future acquisitions.

The name of the Trust provided to you in correspondence is the same wording which should be used in the hold of all real estate. If the documents have not already been provided to Schofield & Grossman, then a copy of all existing Deeds on your home and other real estate should be sent to the firm for the preparation of the appropriate transfer documents for your signature. It is recommended that the original Deeds not be mailed. Photocopies are sufficient.

If there is indebtedness on your residence, the transferring of that asset to the Trust will not create acceleration payments to any lending institution or private individual. Acceleration on any outstanding indebtedness by virtue of a transfer to a Revocable Living Trust is prohibited under Federal Law on your personal residence. Once the document has been prepared, signed, and notarized, it will then be recorded in the County where the property is located.

In addition to providing the firm with photocopies of the Deeds, please also provide a photocopy of the most recent Tax Bills for each parcel so that the necessary information from the County Assessors Office may be obtained. Some Counties are now requiring some form of identification, such as the Assessor's Parcel Number , be included on the Deeds at the time of recordation. This is simply recording information and has no relevance as to any adverse taxation to the property.

You should anticipate that, from the time the original Deed is sent to the County Recorder for recordation and returned to you, it will take approximately six to ten weeks.

When real estate, other than a residence, is encumbered by an indebtedness, such as a Mortgage or Deed of Trust, then the same procedures for preparing, signing, notarizing, and recording the transfer document would be followed. In those situations where there is an existing indebtedness, it will be necessary to contact the existing financial institution that is the holder of either a Mortgage or Deed of Trust to obtain permission for the transfer from you as individuals to you as Co-Trustees. Past experience has indicated that this is not a practical problem. However, failure to obtain that prior approval may result in an acceleration of payments.

Therefore, on any parcel of property that you may have, other than your residence, please also send the lender's name, address, and loan number with the photocopy of the Deed so that the firm may contact the lender for approval.

On all real property, as in the case of your residence, please send a photocopy of the County Tax Bill so that the firm may obtain the appropriate Assessor's Parcel Number and other pertinent information required for filing the Deed.

It is recommended that any Savings Accounts in Banks and/or deposits in a Savings and Loan Association held in the name of the Trust.

You will find that the task of transferring this asset to the Trust is quite simple. You simply show the individual handling New Accounts your existing passbook along with the firm's instructional letter providing the name of the Trust.

Occasionally, Banks or Savings and Loan Associations will request a photocopy of the Trust Agreement, and, therefore, it is recommended that the signed original provided to you at the time of execution, be given to the Bank so that they can make a photocopy of the necessary pages for their own purpose. Make sure that the signed original is returned to you. You can be assured that the Bank or Savings and Loan Association will hold the document in the strictest confidence and that they are only attempting to assure themselves that the Trust Agreement is, in fact, in existence. On occasion, they may request a Certification of the Trust. If this is requested, please contact the firm and a Certification will be provided to you for delivery to the financial institution.

By virtue of Paragraph W under the Powers of Trustee in your Trust, it will be possible for either of you to make withdrawals from a Savings and Loan Account or any other type of bank account which is held in the name of the Trust. Both signatures will not be required; however, it may be necessary for you to specifically point out that Paragraph to the financial institution to make sure that this has been clarified. It is recommended that you request the institution to mark the signature card in such a way that all Tellers will know that a single signature will be sufficient for an withdrawals and/or deposits.

If you have any other investment vehicles at a financial institution, such as a Certificate of Deposit, it is recommended that these assets also be held in the name of the Trust. This could be discussed with the same individual handling the transfer of any other type of financial institution asset to the Trust. However, you should be careful to ascertain from the institution that the change from you as individuals to you as Co-Trustees will in no way adversely affect the interest being paid on the investment. On occasion, it has been found that such a change may create some form of a forfeiture. If such is the case, it is recommended that you wait until the Certificate matures and, at that time, change it to the name of the Trust to ensure that there is no financial loss.

When transferring stocks or bonds to your Trust, a different procedure will be used for privately held stock compared to that used for publicly traded stock on an exchange.

The transfer of privately held security instruments, such as stocks and bonds in a privately held Corporation, can be accomplished simply by having new Stock Certificates prepared in the name of the Trust and surrendering the prior Stock Certificates. This does not require either a permit from a state agency nor does it have any type of adverse tax consequences. In the event that the Corporation has any problems with this transfer, please have that individual contact the firm.

In transferring publicly held stocks or bonds, it will be necessary to work through a Stockbroker or through the institution from whom the asset was purchased. In the case of publicly traded stock, the stock broker will require you to surrender the Certificates and sign certain transfer documents which are normal procedures. They may also require a photocopy of the Trust, but, as in the case of the financial institutions, such is required only for demonstrating that the Trust is in existence and will be held in the strictest confidence. The brokerage firm and/or transfer agent through whom the stock broker must work may also require a Certification of the Trust. Again, this can be provided by the firm.

If you desire, my firm can handle this transfer for you. However, experience has demonstrated that the brokerage firm will be substantially less expensive and probably more efficient.

If you have purchased an interest in funds, such as a mutual fund, it is usually only necessary for you to provide a photocopy of the instructional letter as to how the asset is to be held to satisfy their requirements.

You need not be concerned if the institutions issuing stocks and bonds do not use the exact verbiage recommended in the title. For example, the firm has found that brokerage firms commonly use the designation "U/A" representing "under agreement" in place of "U/D/T" as recommended previously. This is simply a change in style and has no adverse consequence to you. However, if the designation that they insist on using does not seem within the general parameters of what has been recommended, that you contact my office for appropriate advice.

The assets that are not recommended to be held in the name of the Trust are regular checking accounts and automobiles. This recommendation would not apply if very large funds are held on an ongoing basis in a checking account nor would it apply if an automobile was not primarily a transportation vehicle but, in fact, some kind of collectible and one which has unusual value. If either of these unusual circumstances suggested applies, the question of how the asset should be held should be discussed with me so all relevant issues can be thoroughly analyzed.

It is recommended that normal day-to-day checking accounts and vehicles used on an ongoing basis be held in joint tenancy form. This can normally be accomplished either by having the document of title read in both your names with the phrase "as Joint Tenants" included after your names or, in the alternative, simply by having an "or" between your names. Either is a generally accepted Joint Tenancy form.

In the event that you own a mobile home or some other type of vehicle, it is recommended that the best course of action is to provide my firm with a photocopy of the document of title to ensure that the appropriate state office is contacted to change the ownership name from its present form to the Trust form. Depending on the size of the mobile home or other vehicle, the license and ownership documents may vary greatly.

Partnerships fall into two (2) categories. Those categories are either General Partnerships or Limited Partnerships.

If either Partnership was bought through a public offering, then the institution making the sale should be contacted and given a photocopy of the instructional letter with a request that the name of the ownership be changed to the name of the Trust. On rare occasions, such institutions may also require some type of demonstration as to the existence of the Trust, but, normally, they will tell you exactly what they require. This will often raise questions that are best discussed with the firm.

When transferring a privately held interest in either a General or Limited Partnership, it is recommended that a photocopy of the Partnership Agreement and/or Certificate be provided to the firm. This will enable the firm to thoroughly analyze the Agreement to determine whether there are any prohibitions that would require a special handling of the asset when making the transfer to the Trust.

In the circumstances of a private Limited Partnership where there is an intended transfer of the property from its present form, it is not unusual that an approval be obtained from all Limited Partners. Unfortunately, this type of provision was intended to apply to a situation where individuals attempted to sell their interest to a third party and was not intended to address the question of individuals transferring their interest in the Limited Partnership to a Trust. However, the legal effect may require that when a transfer to a Trust is desired, permission must be obtained. This is normally a simple formality but failure to follow that formality may invalidate the transfer of the Limited Partnership interest to the Trust.

Where there is an ownership interest in either a Promissory Note or some other type of debt instrument, you should send a photocopy of the debt instrument along with a photocopy of any security documents, such as a Deed of Trust or a Mortgage, to the firm so that an appropriate transfer can be made with the documents normally required under State Law. This is a fairly easy procedure but one which is best handled through my law firm. If there is either a mortgage or deed of trust, the transfer document may be required to be filed with the County Recorder.

Oil, gas, and mineral rights are often the most troublesome assets when transferring them to a Revocable Living Trust. The reason is, depending on the location or depending on how the asset came into existence, they may be treated either as an interest in real estate or an interest in personal property. Only through an examination of the document of title would it be possible to determine exactly the method by which such right should be transferred to the Trust. Accordingly, a photocopy of the document of title should be sent to the firm for review. Appropriate preparation of the necessary document would correctly reflect the jurisdiction in which the interest is located as well as the form in which it must take after it is determined whether the interest is in the form of real estate or in the form of personal property or a mixture of the two.

When the Trust Agreement was originally signed, an Assignment transferring all personal property, including furniture, furnishings, and personal effects, was signed and notarized and the original delivered to you. This normally covers most assets of a personal nature. However, if there is within the family, a collectible asset of significant value, such as a Coin Collection, unusual art, or the like, it may be appropriate to make a specific Assignment to the Trust. The issue is really one of making sure that there is a clear identification of an asset that has an unusual value. Therefore, interests in Collectibles should either be described in writing and in detail and/or a discussion be held with the firm to ensure that a thorough analysis can be made of the options available and a course of action recommended.

Other assets may exist in the Trust Estate other than those listed where consideration should be given to transferring your interest to your Revocable Living Trust. In this circumstance, if there is a document of title, then it is recommended that a photocopy of the document be provided to the firm so that a thorough analysis can be made. Also, if there is any interest in the Trust Estate, such as in the circumstance of a family member being the Beneficiary of a Probate presently in process, then that should be personally discussed to ascertain what steps should be taken.

The Beneficiary designation given to you in the instructional letter also includes the actual name of the Trust designation for other assets.

It is recommended that the Trust be named as Beneficiary of all existing and future life insurance policies of a significant size.

This same designation may be used not only on life insurance policies but also in any other situation where it is appropriate to name the Trust as Beneficiary.

As it applies to life insurance, there is one type of policy which may not name a Trust as Beneficiary. That is, the policies that are provided to Veterans. These policies are normally between $5,000.00 to $10,000.00 in value and, therefore, not significant in terms of the overall Estate Planning. Normally, in this circumstance, the most common used Beneficiary designation is the spouse with the children named as the alternate Beneficiaries.

Regarding life insurance, consideration should be given to having the Wife own the insurance policy on the life of the Husband and vice versa, and the Trust named as Beneficiary using the designation given above.

You should contact your insurance agent and request that he provide you with the necessary forms to change the ownership of the policies and to make the change of Beneficiary as indicated. If your life insurance is already owned as discussed above, you should discuss with your agent the naming of a contingent owner to provide for the eventuality if the wife is the first to die. It may be determined best to name the Trust as a contingent owner. Do not hesitate to have your agent contact the firm to work out the details.

Because of the present status of law in those situations where either party is covered under a Corporation or individual Pension Plan, such as a Keogh Plan or IRA, it is recommended that the primary Beneficiary be the spouse and that the Trust be named as a contingent Beneficiary. Concerning the contingent Beneficiary, it is recommended that the same name be utilized as has been recommended for the designation of the Trust for life insurance purposes.

This is one area where there is often a considerable amount of detail created simply by virtue of the forms which are used by the Pension Administrators managing the Plans. If there is any confusion regarding the preparation of those Beneficiary designation documents, photocopies should be sent to the firm so that appropriate recommendations can be made and assistance rendered.

The reason it is recommended the spouse be named as the primary Beneficiary is that failure to name the spouse may require waiver documents, the exact design of which is in much dispute, to insure compliance with the Federal Law. It has been found to be simpler to name the spouse recognizing that there is normally sufficient other assets to fund the Decedent's Trust so that there will not be an adverse tax consequence imposed on the family by virtue of this situation. Also, by naming the spouse as the Beneficiary, there is an absolute guarantee that the 100% marital deduction would be in effect. This provision provides that the transfer of any asset to the surviving spouse by virtue of a death is functionally tax exempt.

The only transfers to be made to a Revocable Living Trust are interests which are owned in assets. Debts that have been incurred by the family are not transferred to the Trust.

On rare occasions, it has been found that some institutions, because of the peculiarities in which their Charter documents are written, may require a minor modification in the Trust Agreement to accommodate their individual rules. If such is the case, please request that they give you and/or the firm the verbiage that they require in writing. From that information, an appropriate Amendment can be prepared to ensure that the asset can be properly transferred to the Trust.

Occasionally, the question arises as to whether or not the assets that have been transferred to the Trust are protected from creditors. The answer is that the Trust instrument is not designed for the protection of assets from creditors and, therefore, is completely neutral as to any rights which the creditors would have whether or not you had a Trust. However, after the death of one spouse, this issue changes and a thorough analysis should be undertaken with my firm at that time.

Also, the question often arises as to whether a tax return for a Revocable Living Trust is required to be filed on an annual basis. For many years, the filing of Form 1041 was required, but the present status of the Law specifically precludes even the filing for an identification Number and, hence, there is no need to prepare or file a Form 1041, Fiduciary Tax Return, until the death of one of the Trustors.

As a practical matter, after the death of one of the parties, it may be necessary that an asset that had been transferred to the Trust may be required to be probated. An example of such a situation is when there is a cloud on the title of a parcel of real estate. Fortunately, in most jurisdictions, this would simply require the use of the Probate Court to determine the ownership rights as to that particular asset and would not require any other asset not in question to be subjected to Probate.

You are invited to seek advice on any questions which may arise in transferring assets to the Trust to ensure that appropriate procedures are followed in satisfying the general legal requirements of the transfer of assets to the Trust as well as any special requirements that may come into existence by virtue of the peculiar requirements of some institution.


   
       Disclaimer of Liability: This site is provided as a public service. While the information on this site is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein or at other sites to which we link. We assume no responsibility for any information, advice or services provided by any site to which we link.

We Serve the following Cities and Zip Codes:

90640, Montebello 90660, Pico Rivera
91006, Arcadia 91007, Arcadia
91011, Flintridge 91016, Monrovia
91024, Sierra Madre 91030, South Pasadena
91101, Pasadena 91103, Pasadena
91104, Pasadena 91105, Pasadena
91107, Pasadena 91108, San Marino
91202, Glendale 91203, Glendale
91205, Glendale 91206, Glendale
91208, Glendale 91214, La Crescenta
91501, Burbank 91502, Burbank
91505, Burbank 91506, Burbank