August 16, 2010
Not every asset is handled in the same way when transferring it (also known as “funding the trust”) into the Revocable Living Trust. As a matter of fact, there are certain types of assets that if transferred into the Revocable Living Trust will cause significant tax consequences. A common manner in naming a Revocable Living Trust is “The Smith Trust, dated 01/01/2010, Joe Smith Trustor and/or Trustee”. The discussion below will apply for a Revocable Living Trust in North Carolina and not any other type of Trust. You should always consult with your CPA, Financial Planner and Attorney prior to making any transfers of ownership or beneficiary name changes.
Checking Accounts/Savings Accounts/CD’s/Stocks/Mutual Funds: The name of the current owner on these assets will change to the name of the Trust. You will probably have to do this in person for checking accounts and savings accounts as the bank will want you to sign a new signature card. Instead of signing the checks as Joe Smith you will sign them as Joe Smith, Trustee. Before doing this with your CD accounts, check with the bank if they will impose a penalty if you transfer it before the period has run.
L ife Insurance: You will remain as the named owner on the Life Insurance Policy. You will request that the Revocable Living Trust be named as the beneficiary.
Annuity: It is recommended that if you are married that the spouse remain as the primary beneficiary and if you have children, they should be named as secondary beneficiaries. This is due to the fact that there are certain options available to a spouse that are not available to a Living Trust.
IRA: If between a husband and wife, then the ownership must remain in the name of one of the spouses and the primary beneficiary as the surviving spouse. The Revocable Living Trust can be made the secondary beneficiary. You MUST check with your CPA to determine if there are any income tax consequences to these changes.
Personal Property: Typically any property that does not have a physical title (such as household furnishings, jewelry, clothes, etc.) is handled by a document called “Assignment of Furniture, Furnishings and Personal Effects”. This document is signed at the time your Revocable Living Trust is signed. Not only does it transfer the assets you currently have into the Revocable Living Trust but it also transfers any future property of that nature.
Real Property: The deed will be re-recorded with the name of the Revocable Living Trust as the owner. You should contact you insurance company prior to making this change to determine if they will allow a Revocable Living Trust to be a secondary insured on the policy. You should check with your mortgage company as well.
 | Free Legacy Planning KitYou are owed the peace of mind knowing that the decisions you make today are the best decisions for your family’s tomorrow.Download Your Free Legacy Planning Kit . |
Liked this article? Subscribe to the RSS feed
Visitors who read this post also read:
- What Happens if a Home Does Not Get Placed Into a Revocable Living Trust?
- An Ex-Spouse Should Also Be An Ex-Beneficiary!
- Advantages of a Revocable Living Trust
- What Is The Difference Between A Trustee And An Executor?
- What is the Difference Between a Last Will and Testament and a Revocable Living Trust?