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Guide for Transfer of Assets to a Revocable Living Trust
This memorandum has been prepared to provide you with some general information and to describe what should be done to transfer assets to yourselves as trustee(s) of your revocable living trust, or prepare beneficiary designations.
Why Transfer Assets to Yourselves as Trustees?
Objectives of the trust, including avoidance of probate administration upon your death, will be defeated if title remains in your name. Therefore, a formal transfer of title is essential.
What "Name" Should be Used?
We suggest that the title to trust assets be held by the trustee(s) in substantially the form set out in the following examples:
Co-Trustees: "John Jones and Mary Jones, Trustees of The Jones Trust dated January 1, 2009”.
Single Trustee: “Mary Jones, Trustee of The Mary Jones Trust dated January 1, 2009”.
Some institutions with whom you may deal (for example, brokerages and banks) may wish to use a different sequence of words in the trust name, or abbreviations, such as:
"John Jones and Mary Jones, Trustees UTA dtd 1/1/09”.
“Mary Jones, Trustee UTA dtd 1/1/09”.
Our discussions may refer interchangeably to transfer to “the trust” or “the trustee(s)”. In fact, legal title must include the names of the trustee(s) and the trust. A deed granting title to “The Jones Trust dated January 1, 2009” with no reference to the trustee(s) is not valid.
Taxpayer Identification Number
A revocable trust does not pay taxes. For Federal and California income tax purposes, the assets in the trust are treated as belonging to you. If you file income tax returns and report trust income on your returns and if you are the trustee of your trust, the Internal Revenue Service and the California Franchise Tax Board do not require a separate tax identification number for your revocable trust.
When transferring assets, or when dealing with banks, stock transfer agents or other payors of income, you will be asked to supply a "taxpayer identification number" for the trust. You should use your social security number as the trust's taxpayer identification number. Where a trust has been created by a husband and wife, either trustor's social security number can be used.
If your residence is to be held as an asset of the trust, we recommend that you transfer title to the residence to your name(s) as trustee(s). If your residence is a cooperative or condominium apartment, we will advise you how to effect the transfer.
If title to your residence is to be transferred into the trust name, please give us a copy of the current deed to your residence containing the "legal" description of the residence and the assessor's parcel number. We will prepare a new deed showing you as the grantor(s) and the trustee(s) of the trust, in the form suggested on page 1, as grantee, and we can then arrange to record the new deed. Under current law, transfers of property to a revocable trust will not result in reassessment of the property and we will file with the assessor the necessary form claiming this exemption.
Other Real Property
If you own other interests in real property you should consider including those interests in the trust. You must sign a deed for each separate real property interest that you transfer to the trust. Please supply us with copies of current deeds to these properties.
Because of possible inconvenience, we do not recommend changing the name of your day-to-day small checking accounts. If the total assets you retain outside the trust are less than $100,000, California law permits transfer after death by "declaration" and without formal probate.
We recommend that your savings accounts be held by the trustee(s) of the revocable trust. Any bank or savings and loan association savings account or certificate of deposit should be transferred to the name of the trust in the form suggested on page 1 of this memorandum. You should discuss transfer of these accounts directly with the depository institution who will complete its internal paperwork for you.
You should register any securities account in the name of the trust, as suggested on page 1 above. You should talk directly with your broker who will prepare a new account agreement for your signature.
Marketable Securities Not Held in Brokerage Accounts
Any securities not held in a brokerage or custody account should be re‑registered in the name of the trust in the form suggested on page 1. To transfer any stock certificate which you hold, you are generally required to submit the stock certificates, along with an executed assignment (either on the reverse of the certificate or an Assignment Separate From Security) with your signatures guaranteed by your stockbroker or bank, to the transfer agent with instructions to reissue the certificate to the name of the trust.
Securities in Closely Held Companies
To transfer to the trust any shares of stock in a closely held company which is now held in your name(s), you should instruct the secretary of the corporation to issue new certificates in the name(s) of the trustee(s) in the form suggested on page 1. Existing certificates should then be cancelled.
Investments in Partnerships
Some partnership agreements may not permit an investor to transfer his or her partnership interest to a trust which the investor has created. If you are considering the transfer of any partnership interest to your revocable trust, you may want us to examine a copy of the partnership agreement and any amendments to the agreement to determine whether a transfer is permitted. If the partnership agreement permits the transfer, you then sign an Assignment of Partnership Interest, which we can prepare. Some partnerships also impose a fee for a transfer. It may also be necessary for the partners to sign a consent to the substitution of the trust as a partner.
Beneficiary Designation Assets
Certain assets such as life insurance, retirement plans and accounts, and annuities pass under beneficiary designation forms filed with the respective companies rather than under your will or trust.
Life Insurance Policies
It is not necessary to transfer ownership of life insurance policies to a revocable living trust. Life insurance proceeds are not subject to administration in a probate estate when a beneficiary other than one's "estate" is named on the beneficiary designation form filed with the life insurance company. It may be satisfactory to retain your current beneficiaries (so long as your "estate" is not your beneficiary), or you may wish to name the trustee as beneficiary. We recommend that you discuss with us the appropriate beneficiary.
To change the beneficiary designation on personally owned life insurance policies, you may write to the company and ask for "change of beneficiary" forms, or you may ask your life insurance agent to handle the changes.
Employee Benefits and Retirement Plans
We recommend that you discuss with us the choice of a beneficiary of the proceeds of retirement type accounts, including Individual Retirement Accounts, Keogh plan accounts, 401(k) accounts, company pensions, deferred compensation accounts, and other retirement accounts. The employed spouse should generally name the other spouse as the primary beneficiary and other individuals, such as children or the trust as contingent beneficiary; if the trust is so named, the account can be made payable to the trustee(s) in the form suggested on page 1 of this memorandum. The law currently requires strict compliance with the formalities of signing certain types of beneficiary designations. Income tax consequences vary depending on the beneficiary designation. In particular, naming the trust as beneficiary of an IRA or other retirement type account can have adverse tax consequences. We strongly recommend that you discuss the beneficiary designation with us or other tax advisors.
Annuities also pass under beneficiary designations rather than under your will or trust. These beneficiary designations are tax sensitive, so please discuss these with us or your other tax advisors.
We hope that the above information is helpful to you. Please let us know if we can be of any help in transferring your assets to your revocable trust or preparing beneficiary designations.