1. Funding the Trust. One of the primary reasons for having a trust is to avoid the cost and inconvenience of probate. Although the trust provides you with an orderly disposition of your estate, you will not avoid probate unless and until the trust obtains legal title to your property. This is called “funding” the trust. You will need new signature cards for the trust bank accounts and new documents of title for your non-homestead real property. Future assets should be put in the trust’s name (except automobiles and usually your homestead. If you take title to property in your own name instead of the trust, you will undo the trust to that extent.
2. Manner of Holding Title. Whenever you purchase a significant asset or change the composition of the Trust assets, you should request the escrow agent or other responsible individual to title the new asset in your name as Trustee of your revocable trust. While this may appear cumbersome or awkward at first, no one can doubt that the asset was owned by the Trust. Once the asset is in the Trust, you may thereafter deal with that asset by signing your name, “as Trustee.”
3. Revocability. Your Trust is revocable and amendable in whole or in part. You may remove any asset from the Trust without anyone’s approval and also choose to change or otherwise modify the Trust. Trust Agreements are drafted to meet individual specifications and needs. Any major revision or alteration to a Trust should be done by one familiar with trust law.
4. Amendment. These documents are executed with certain formalities and can be changed or revoked only by using similar procedures. If you wish to insert a change into your trust, consult an attorney. A note in the margin of your document, or a striking out of words, is ineffective. It cannot be emphasized enough the importance and need to follow the proper steps for amendment.
5. Change of Beneficiary Forms. Request change of beneficiary forms from your insurance companies and then name your trust as the beneficiary. Insurance proceeds should go into the trust so that they will be directed by a trustee according to the estate plan. An outright payment circumvents the protections contained in the trust documents. However, before you change the beneficiary of your IRA, KEOGH, or other retirement plan, be sure that your tax advisor approves, and that you fully understand the tax ramifications of any change of beneficiary in a retirement plan.
6. Stock. To transfer your stock to the trust, the title on each stock certificate must be changed to show that you hold title as trustee for your trust. If a brokerage firm holds your shares, only the title on the brokerage account needs to be changed. Your broker can help you make this change for a small charge per certificate. Your stockbroker may request a complete copy of the signed trust, but usually the Trust Certificate is all that is needed.
7. Other Tangible Personal Property. Tangible personal property may be shown on Schedule “A” to the Trust. In addition, you may choose to designate tangible personal property on a document known as the “Little List” attached to your will. The “Little List” may include items, such as, family heirlooms or furniture.
8. Tax Returns. I.R.S. regulations provide that “grantor trusts” of which the grantor is trustee or co-trustee need not file a tax return. All trust income will be reported under your social security number. When you “graduate to glory,” the Trust will become irrevocable, and a new Taxpayer Identification Number will then be required.
9. Joint Tenancy. Do not title any assets as joint tenants without consulting an attorney. A joint tenancy bypasses the trust, may frustrate your intentions, and could have adverse tax consequences.
10. Management After Death. The Trust which you have executed offers you many advantages with minimum inconvenience. It is a creation of the law which allows the orderly disposition of your estates without the cost or delay sometimes found in formal probate. You can put your mind at ease that as a result of this step in properly planning your objectives, you have prepared for the future support and well-being of yourself and your loved ones.
