Below is a generalized form of the funding instructions we send out to clients after they have executed their revocable living trusts. In many cases, the specific instructions will differ from these based on the issues relevant to a particular client.
Form of Title - Spouses
In general all assets you own and transfer to your Trust, and those you purchase in the name of your Trust should be titled either in completely separate accounts for each spouse’s Trust, or in one “tenants-in-common” account. Some banks and financial institutions will not allow the use of “tenants-in-common” accounts for Trusts, while others have no issue accommodating this method of titling. Sometimes banks and financial institutions will have one set of rules for their “retail” accounts and clients, and another set of rules for the investment accounts and clients.
For each of the Trust accounts that will be held separately, they should be titled as follows:
| For John Smith's accounts: | For Jaime Smith's accounts: | |
| John Smith, Trustee | Jaime Smith, Trustee | |
| Jaime Smith, Trustee | John Smith, Trustee | |
| John Smith Revocable Living Trust | Jaime Smith Revocable Living Trust | |
| Dated the __/__/20__ | Dated the __/__/20__ |
If you will use one “tenants-in-common” account, where both Trusts are co-owners of each account, for any assets, then the accounts would be titled as follows:
John Smith, Trustee
Jaime Smith, Trustee
John Smith Revocable Living Trust
Dated the __/__/20__ ; and
Jaime Smith, Trustee
John Smith, Trustee
Jaime Smith Revocable Living Trust
Dated the __/__/20__
Tenants-in-Common
or
John Smith, Trustee, Jaime Smith, Trustee, John Smith Revocable Living Trust, Dated the __/__/20__ , and any amendments thereto; and Jaime Smith, Trustee, John Smith, Trustee, Jaime Smith Revocable Living Trust, Dated the __/__/20__ , and any amendments thereto, as tenants-in-common.
Do not be surprised if any particular institution uses a slightly different wording for the trust designation. Normally, changes of that kind are simply questions of form and not of substance. However, if there is any question in your mind as to any designation being legal sufficient, please contact me. It is also possible that accounts may have only the primary trustee name, and not the spouse trustee name.
Not all of the following may apply to your assets today, but they may apply in the future and you should retain these instructions for future use.
Form of Title - Single
The titling is basically the same, but usually without a co-trustee.
Jane Smith, Trustee
Jane Smith Revocable Living Trust
Dated the __/__/20__
or
Jane Smith, Trustee, Jane Smith Revocable Living Trust, Dated the __/__/20__, and any amendments thereto.
Real Property
Often we are helping you with the re-titling of your currently owned real property in the Maryland, DC and Virginia area. Any property you acquire in the future should be held in the name of your Trust as set out above. If you acquire any property through inheritance or did not take title as trustee of your Trust, remember to have a new deed prepared by a licensed attorney, transferring your interest into the Trust. Generally, deeds transferring real estate to the trustee of your Trust should be recorded in the public records in the county where the real estate is located.
If you acquire out-of-state real estate, be sure to have that property transferred into your Trust to avoid probate in the state where the property is located. An attorney in the state where the property is located should be contacted to prepare the out-of-state deed. If you need help or assistance in contacting an out-of-state attorney, please contact me.
Title Insurance and Homeowners Insurance
You should inquire of your title insurance and property insurance carriers whether endorsem*nts to your policies will be necessary due to the transfer of title to your Trust.
Oil, Gas and Mineral Rights Connected to Real Estate
If you have oil, gas and/or mineral rights connected to real estate you own in another state, it is important to transfer your interests in the underlying real estate and your contract rights with the company (such as XTO Energy, Chaparral, Hess, etc.). Contact us about locating an attorney in that area to assist you.
Financial Accounts, Including: Bank Accounts, Savings Accounts, Money Market Accounts, and Stocks and Bonds
Generally you will want to change the ownership of your financial accounts, savings accounts and money market accounts into the name of your Trust.
It is usually best to go to the financial institution to accomplish this change of ownership. The institution will provide you with new account forms and signature cards to be signed by all of the current trustees. Keep in mind that even though the Trust will own the account you will always retain the signature authority.
In regard to stocks and bonds specifically, you normally purchase these through a broker. In some cases, stock certificates are issued and held by you; and, in other cases they are held by your brokerage company in what is known as a "street account," i.e. you receive a monthly statement listing all of your security holdings. When purchased and held by you, all stocks, bonds or other securities should be titled in the name of your Trust. If your securities are held in your brokerage firm's street name, you simply title the brokerage account in the name of your Trust. Where two Trusts are owning the account as “tenants-in-common” the account should show both Trust names as noted above. Your broker can help you with these transfers.
If your financial institution wants a copy of the Trust agreement, it will usually suffice to provide them with the Affidavit and Certificate of Trust, or a copy of the first page, the trustee pages and the signature page of the documents. Sometimes, brokers will accept a letter signed by the trustee(s) stating that the trustee(s) have the power to enter into the account, although again the Affidavit and Certificate of Trust should suffice. It is usually better not to give your broker a complete copy of your Revocable Living Trust. The provisions whereby you state who will inherit your property are not relevant to the financial institution’s business. Only provide the minimum amount of information that is required.
You may receive a `Form W-9: Payer's Request for Taxpayer Identification Number'. IRS regulations require the payer to withhold 20{93997c19cca2413204031df21c26e128a46aabe0f65d6d1b886d87d0d40a7681} from dividends paid to any account that does not have a certified social security number or taxpayer identification number. Therefore, in order to avoid this 20{93997c19cca2413204031df21c26e128a46aabe0f65d6d1b886d87d0d40a7681} withholding, this form should be completed using your social security number. Sign and return the W-9 form to the sender as soon as possible after you receive it.
Retitling your accounts has no effect on the name you have printed on your checks. It only affects the institution's records. You can tell the printer how you wish your checks to read. If you wish to have your checks printed showing individual or joint names, you may do so. However, please ensure that the bank's account records indicate trust ownership at all times.
Certificates of Deposit
With regard to any certificates of deposit, it is necessary for you to check first with a bank to determine if you should wait until the certificates mature before transferring them to your Trust in order to avoid interest penalties for early withdrawal. A bank officer should be able to tell you about any regulations concerning your account. If there is no need to wait for the certificates to mature, you can change ownership of the CDs in the same manner as your checking account.
Closely-Held Stock
Any closely-held stock that you own should be titled directly in the name of your Trust. This can be accomplished by signing the back of your certificates and having the corporation issue a new certificate in the name of the Trust. However, if the corporation has a buy-sell agreement or corporate redemption agreement which limits or prohibits transfer or assignment of stock, those corporate agreements may need an amendment. Please let us know if the corporate counsel for the closely held business cannot accomplish this or has any questions in this regard, as we can and do provide corporate services to our clients.
Partnership Interests General Partnership
If you are a member of a partnership, we would be happy to review your Partnership Agreement and advise you specifically as to what steps are necessary to transfer your partnership interest into your Revocable Living Trust.
Limited Partnership
Transfer of your interest in a limited partnership is generally accomplished in the same manner as a general partnership interest. After reviewing your Partnership Agreement, we can prepare for you an Assignment of Limited Partnership Interest for your signature as well as a Consent to Assignment which the general partner must sign.
For More Information on Business Interests:
For more information on transferring business interests to your revocable living trust, review our additional instructions here.
Savings Bonds
The federal government requires the use of Form PD 1851 for transferring U.S. savings bonds. The back of the form has complete instructions. After you have filled out the form, your signature must be "guaranteed" by an officer at your banking institution, and forwarded along with the bonds to:
The Bureau of Public Debt
200 Third Street
Parkersburg, West Virginia 26101
We recommend that all bonds be mailed certified or registered mail, return receipt requested, when asking the bank to process the transfer for you.
Life Insurance Policies
Your Revocable Living Trust will usually be named as the primary beneficiary of all of the life insurance that you own on your life. To change beneficiaries, you need to fill in and sign a change of beneficiary designation for each policy that you own on your life.
The beneficiary designations of life insurance polices can be changed to the name of your trust either by you or your life insurance advisor. We highly recommend that you use your life insurance advisor to make the changes if you can. If your insurance company requests a copy of your Trust, provide the first page, trustee pages (Article 8) and signature page. If you have life insurance and your estate is in excess of the Exemption Equivalent Amount you should consider the use of an Irrevocable Life Insurance Trust to keep all life insurance proceeds totally free from federal estate tax. Feel free to contact me if you would like to explore this option.
If you have group life insurance, your Trust should usually be made into the primary beneficiary. Talk to the person in your company's benefits department who handles this insurance and ask for a change of beneficiary form.
Automobiles
Titles to automobiles, boats and trailers are sometimes difficult to transfer. If a vehicle is left in your name alone, it will usually be subject to probate. In Maryland we often recommend that cars, boats and trailers, etc., be held in the name of the owner. If you know who you want the vehicle to go to at your death, you may consider titling it jointly with that individual. To title the vehicle jointly the title must have both names, with either an “or” between the names, the word “survivor” after the names or the words “tenants by the entireties” or “tenants by the entirety” after the names (if you are married).
You may directly transfer the title of automobiles, trailers and the like into your Revocable Living Trust. However, in our experience, we have found the transfer on death designation to be more easily accomplished. However, in some states this is not an option.
In addition, you should contact your automobile insurance agent to advise him/her of the change in ownership to your Trust.
For information on transferring automobiles, contact the Department of Motor Vehicles in your jurisdiction.
Promissory Notes
Any promissory notes that you hold can be assigned to your Trust. We can help you with the necessary endorsem*nt. You should notify the maker of a promissory note to make all future checks payable to your Trust and not to you individually. If you decide not to notify the maker of the promissory note, there remains some risk that payments made to you in your individual name might end up being subject to probate administration upon your disability or death.
Please call us if you have any questions regarding funding any particular asset to your Revocable Living Trust(s). Keeping all of your assets titled in the name of your Trust(s) is a life-long process. However, the rewards of keeping your Trust(s) fully funded should outweigh any minor inconveniences you incur along the way.
Retirement Plan Proceeds and Individual Retirement Accounts
The general rule is that all retirement plans of any kind, including your IRAs, 401(k) plans and other tax deferred accounts, should not be transferred into your Revocable Living Trust. The tax rules regarding beneficiary designations of retirement plans and IRA accounts are complex. As noted above, since it is generally a bad idea to name the trust as a beneficiary of such accounts, you should discuss this matter further with your financial planner or your CPA before making a decision to name your trust as an owner (which requires a significant tax payment) or as a primary beneficiary. We would also be glad to discuss this matter with either your financial planner or your CPA. Contact the plan administrator to make this change in beneficiary designation.
INCOME TAX ISSUES
Your Revocable Living Trust is a Grantor Trust as described in Internal Revenue Code Section 671 and Regulations Section 1.671-4. Therefore, your Trust is not required to file a separate income tax return. You will report all income and expense on your own Form 1040.
Under Internal Revenue Code Regulation Section 301.6109-1(a)(2), the federal identification number for a Grantor Trust is the same as the grantor's social security number. Anyone who requests the federal identification number of your Trust should be provided with your social security number.
