Keeping your assets in your trust.

Posted by on Aug 13, 2013

Keeping your assets in your trust.

I started a theme last month, which has to do with making sure your assets are in your trust. This goes for real property as well as other forms of property. Last month I wrote about making sure that real property you own in states other than California is re-titled in your names as trustees of your trust.

Let’s step back a minute and review what the legal term “property” refers to. Often people say they have no “property” because they don’t own real estate, or because they have not yet paid off their mortgage.

Legally, there are several types of property and everyone has something. Real property means buildings and land. Tangible personal property is anything you can touch, from your car to your jewelry to your household furnishings, my yarn stash, etc.  Intangible personal property is cash and its equivalents:  mutual funds, retirement accounts, life insurance policies. Then there is intellectual property and that includes copyrights, patents—even something not yet published could be construed as intellectual property. On-line assets are in a category of their own.

For those of you who’ve done trusts with me, you know that I make sure that your California real property is transferred to you as trustee(s) of your trust, and we do that by recording a new deed with the county recorder. If you own real property in another state I recommend that you consult with an attorney or title company in that state to make sure that your out-of-state real property is titled in your name(s) as trustee(s).

What about all those bank and brokerage accounts that we list on Schedule A, the last page of your trust?  I give you a general guidance letter on how such accounts should be re-titled and I give you specific letters to use to go to a local bank or call someone at a brokerage house, such as Fidelity or Vanguard. Each institution has its own forms they may ask you to fill out to retitle an account. Or they may ask to see a Certification of Trust which is a bare-bones synopsis of your trust.

Why am I such a pest with clients about getting their assets into their trust? Because you want to make sure that all but under $150,000 worth of your assets either have designated beneficiaries, as with retirement-type accounts, OR are in your names as trustees of your trusts. This is to prevent probate, to make sure that your heirs do not have to go to court and pay a small fortune in lawyers’ fees and court costs to inherit your property.

When you retitle a savings or brokerage account in your name as trustee of your trust, you may be asked by the institution about the trust’s taxpayer identification number. What is it? The answer is that while a settlor or settlors, makers of a trust, are alive and the trust remains revocable, the taxpayer I.D. number is the settlor’s very own social security number. A trust does not get its own new taxpayer I.D. number until after the settlor has died. Then the successor trustee will need to obtain a new IRS tax I.D. number, which is very easy using a form the IRS has on-line.

What about all the tangible items, the cars, the jewelry, artwork, etc.? Generally, these things are construed to be “in” the trust without any need to change any paperwork regarding title.

What concerns me most is that with many clients who make trusts with me, though I write letters for them to use to go to the banks and brokerage houses to re-title their accounts, they just don’t do it. I know this because when they come in to the office some time later to make amendments to their trusts, I ask and find out that they never “funded” their trusts with their cash equivalents.

That’s not smart and it’s an easy problem to fix. If you have not yet funded your trust with all of your non-retirement type accounts, please do it. And if you need help, schedule an appointment to have me remind you how.