If you have a revocable living trust, there may be questions that you have about the funding and operation of your trust. Here are a few frequently asked questions about your trust once it is in place.
1. How do I re-title assets into the name of my trust? If you are single, you are the sole Trustor (also called a Settlor) and the sole Trustee. To transfer your assets into your trust, you need to re-title the assets into your name as Trustee of your trust. As an example, if your trust is called the John M. Smith Trust dated 2/25/10, you would transfer the assets into the name of the John M. Smith Trust dated 2/25/10. If you are married, your trust might be called the John M. and Sally S. Smith Trust or maybe the Smith Family Trust. You will re-title your assets to John M. Smith and Sally S. Smith, Trustees of the Smith Family Trust dated 2/25/10. With bank accounts, the easiest way to take care of transferring your accounts is to go personally to the bank and advise them that you have a trust and want your accounts in the name of your trust. Other assets such as mutual funds, stocks and bonds, etc. can be re-titled by contacting the company or your broker to complete the necessary paperwork. Real property that you owned at the time you created the trust should be transferred into your trust by the attorney creating your trust, but if you acquire additional real property, remember to transfer it into your trust by a deed recorded with the county recorder.
2. Do I have to transfer all of my assets into my trust? It is not necessary to title all of your assets in the name of the trust. Some examples of property that is not usually titled in the name of your trust are automobiles, life insurance policies, and retirement plans. You also might own real property or other assets in joint tenancy with other individuals which you want to keep titled in that manner.
3. Do I have to record my living trust somewhere? It is not necessary to record your trust with the County Recorder. One of the benefits of having a trust is the fact that it is private.
4. Do I have to file an income tax return for the trust? No, there is no obligation to file a return for the trust while you are living. You continue to file your personal income return just as you did before you created a trust. If you are married, however, and have an A/B trust (also called a Bypass Trust, an Exemption Trust, or Marital Trust) and your trust splits into two trusts after the first spouse’s death, it will be necessary to file a separate return for the trust of the deceased spouse.
5. I have a revocable living trust with my spouse. Do we have to do anything when one of us passes away? If your trust includes tax planning provisions or is the type of trust that provides for the division of the trust into two separate trusts after the death of the first spouse, there is some work to do after the first death. Your estate planning lawyer that prepared your trust should explain this to you at the time you create the trust and also include instructions with your trust as to what is necessary when the first spouse passes away. Often the surviving spouse has to allocate assets into each of the subtrusts. Usually this requires the surviving spouse to consult with a CPA or estate planning lawyer.
These are general guidelines about the operation of your trust. If you have specific questions about the operation of your trust, how to re-title assets, or need a review of your current trust, feel free to contact us at Scott C. Soady, A Professional Corporation for a free consultation.