An Overlooked Component of Estate Planning with an Irrevocable Living Trust

Once a living trust is established, then specific steps are taken to fund the trust. You can also use beneficiary designations. The property will pass outside of the probate. Some misunderstand that everything you own should be retitled to trust. An attorney will properly guide you through the funding process. You will learn that one does not blindly toss all their assets under the trust’s name. An estate planning attorney will educate you on how beneficiary designations are used. They are used in conjunction with your trust. This allows you to achieve your objectives for distributing your estate without probate. Call Iron Clad Probate Lawyer in Temecula for assistance.

Joint Revocable Trust

A joint revocable living trust is a trust that is set up for two people. It is funded with separate or common property.

A joint revocable trust can be a good option for couples whose estates are not complicated. This includes:

First marriage with the same distribution, beneficiaries, and same trustee

In 2019 whose combined assets do not reach the federal estate tax threshold. $22.8 million combined or $11.4 million per individual.

This article describes steps to get a living trust in California. In some instances, these steps should not be taken, as we have specified below. Since this is merely a guide. We can assist you in properly analyzing the funding of an irrevocable living trust. Some common assets which attorneys confront when addressing funding issues appear below.

Retirement Accounts

Adverse tax consequences could result from transferring certain assets into a trust. This includes IRA’s and retirement plans. It is recommended that retirement funds never be transferred into the trust. Neither should they be retitled in the name of the trust.

One recommendation is for the spouse to be named as the primary beneficiary. With second marriages, sometimes you will provide for children of a prior marriage. In this case, list the children as the primary beneficiary. If you are single, you may designate either your trust or your children as a beneficiary.

It will help if you exercise caution in filling out the change of beneficiary form. Some institutions include a change of ownership section on the same document. A change in ownership of a retirement account is the last thing you want to do. Nor are you transferring or retitling the retirement account(s) in the name of the trust. You are merely effecting a change of the beneficiary for the retirement account.

Life Insurance Policies

On life insurance policies, anyone can be named as a beneficiary. This will avoid probate of the life insurance proceeds even in the absence of a living trust. A living trust allows much greater flexibility and management over life insurance proceeds. It can be prudent for a revocable living trust to be named the beneficiary of a life insurance policy. The trust affords extensive protections to any asset that passes through it. This includes life insurance. As with any asset, there are always potential tax issues. An experienced estate planning attorney would be an excellent resource. I help if you exercise caution in filling out the change of beneficiary form. Some institutions include a change of ownership section on the same document. A change in ownership of a retirement account is the last thing you want to do. Nor are you transferring or retitling the retirement account(s) in the name of the trust. You are merely effecting a change of the beneficiary for the retirement account.

Certificates of Deposit

If you have any deposit certificates, ask someone at the bank if there would be a penalty for retitling any CDs. Some banks treat the matter as a transfer and impose a stiff fine. In this case, you should leave the CDs as is until they mature. If you cash them out at the time of maturity, place the proceeds into an account that bears the name of your trust. If you decide to put the funds into another CD at maturity, inform the bank to title the new CD in the name of your trust.

Stocks and Bonds

Stock and bonds can be handled in a couple of different ways. One option is to request a “Transfer in the Event of Death” form. This way, you can name specific individuals whom you wish to receive the asset upon your death. This will function to allow the asset to pass outside of probate upon your death. Another option is to have the stock registered in the name of the trust. Your investment manager or stockbroker can help you use one of these alternatives.

Tax-Deferred Annuities, Flexible-Premium Deferred Annuities, or Variable & Fixed Annuities

Usually, the owner’s spouse is designated as the beneficiary of your annuity. The children are named as secondary beneficiaries. If unmarried people own annuities have natural persons named as beneficiaries. The trust should never be the owner of an annuity contract. The rule is for only natural persons to be named as beneficiaries under an annuity contract. Otherwise, drastic tax consequences could result and favorable distribution options. This includes the use of a life expectancy to stretch the deferral period for taxes. A knowledgeable estate planning attorney would be an excellent resource for advice. They can help to best handle annuities with living trusts and estate planning.

Bank Accounts

You can ask banks to retitle any accounts into the name of the trust. This includes money in checking, savings, money market, or other bank accounts. The bank handles many of these requests weekly, and it is straightforward to do.

Real Estate

Almost all estate planning law firms will prepare and record any trust transfer deed(s). This includes your home and other real property which you own in any state within the United States. A California living trust can hold title to any real property. Call your insurance agent who handles your homeowner’s insurance. Ask if they need to have your policy reflect that the home is now in your revocable living trust. It would also be prudent to notify your title company that your property is now in a living trust.

Vehicles, Boats, Trailers

As for vehicles, boats, and trailers, California law is favorable to you in this regard. There is no need to go to the DMV and retitle any such assets. There is an exception in the rare case of an expensive car collection. You can leave the title in your name for any cars, boats, and trailers. Any future vehicle purchases should be in your name.

Special Needs Trust Attorney

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