Fund Your Trust!

///Fund Your Trust!
Fund Your Trust! 2017-12-06T11:57:15+00:00

Nothing is more frustrating than reviewing a well drafted estate plan that fails completely because someone did not take the time to fund the trust.  There is simply no reason to not to fund your trust and in fact, depending on the situation, certain estate tax benefits are only obtained if the trust is funded.

Generally, you will need to change the ownership of accounts at financial institutions such as banks, brokerages and investment companies.  Real estate requires the recording of a deed and don’t forget to get the approval of your lender and notify your property insurance.  You can easily make life insurance proceeds payable to your trust by changing the beneficiary designation.  A closely held business such as a corporation, limited liability company or partnership can be transferred to the entity by assigning the stock or interests to the trust and modifying the appropriate records at the Arizona Corporation Commission or Secretary of State’s office.

Here are some ways that you can fun your trust:

Real property which you wish to hold in your trust must be conveyed to the trust by deed.  The deed must be recorded in the county in which the real estate is located.  In Arizona, DeAngelis Legal recommends the use of a special or general warranty deed in order to preserve your rights under the original title policy.  Please remember to also notify your property and casualty insurance carrier of the change in ownership.  If you wish to sell real estate which is part of your trust, you may execute a deed to the purchaser as trustee using the same basic form of title described above.  Special care must be taken with a mobile home, even if it is attached to the real estate.  Mobile homes have a separate title with the Arizona Department of Motor Vehicles and the title must be transferred to the trust with the Arizona Department of Motor Vehicles in addition to transferring the underlying real estate.
The ownership of Individual Retirement Accounts, 401k Plans, Stock Options and other “Qualified” Employee Benefits may not be changed. However, the benefits from such assets may be made payable to your trust by naming the trust as the primary beneficiary of such account or plan on your death. The beneficiary designation will need to be on the form approved by your plan administrator, but should use the name identified on your trust instrument. Alternatively, you could name your spouse as the primary beneficiary and the trust as the secondary beneficiary.

The problem with naming the trust as the beneficiary of such assets is that your beneficiaries may not be able to take advantage of certain deferral provisions of the Internal Revenue Code. The loss of these deferral provisions must be weighed against funding the trust. The decision of whether to designate the trust as the beneficiary depends on a variety of factors including the type of asset, its value, its value relative to the size of your estate, and the terms of your trust.

A corporation can be transferred to your trust by assigning the stock to the trust and updating the records of the Arizona Corporation Commission. An interest in a limited liability company can be transferred by assigning the interest and filing an amendment to your Articles of Organization with the Arizona Corporation Commission. Partnerships, including limited liability partnerships, can be transferred by simply assigning the interest to the trust and updating the Secretary of State’s office records.

If you have loans or other financial guaranties outstanding you should also review your documents or obtain the consent of the lender to make sure the transfer will not accelerate the amount due.

If you would like more information on how to fund your trust, or would like us to create a trust for you, please give us a call at 480-281-1512 or fill out the form on the right.