ESTATE PLANNING: Move Assets to a Trust
This is a continuation of our series on estate planning. Once you have read Part II of the series, regarding the many advantages of having a trust, you are ready to learn how to actually transfer assets to your trust. It is not difficult, but it does not happen by itself, and there are certain considerations.
Essentially, when we talk about “putting assets into the trust,” we mean making the trust the owner of title, rather than having your personal name on the title. Cars and homes are good examples since they have titles that can be transferred in the public record.
So, for example, if you have an investment property(s), it would be a good idea to “put them in the trust” – assuming you do not have immediate plans to sell. You would want to do that for purposes of asset protection and to control disposition of the home(s) after your death.
In our example, you currently appear in the county records as owner of the property. You simply need to transfer the title from your name to the name of the trust.
Remember, your trust is in many way just like another person. In the same way you can be the owner of property, the trust can also.
Trust as Alter-Ego
For real property, the way to bring about the transfer is by executing a deed in favor of the trust, which is exactly what you would do if you were selling the place to a third party. Now, there are different kinds of deeds, which we’re not going to get into here. For now, let us just say you will likely use the simplest kind of deed, which is called a “quitclaim deed.”
As the current owner, you will sign a quitclaim deed naming the trust as the new owner. [Caveat: This must be done correctly or else the County Clerk will not record the deed] Once the signed deed is filed at the county courthouse, the public record will be changed to reflect the trust as the owner of the property.
That’s it. You just “put the home in the trust.” That means, the property will now be governed by the provisions of the trust agreement, rather than statutes regarding inheritance of real property. There is, however, one issue worthy of discussion: homestead properties.
If you live in a state with homestead laws, such as Florida, be aware spouses and heirs enjoy certain statutory rights that may be difficult to avoid.
Let’s take a real-life example. A client came to our firm saying she wanted to give her son a property as part of his inheritance. The son is not currently married, and the client wanted to make sure the home would belong solely to her son even if he later marries and has children. This client, who is rather savvy, understands that, if her son were to live in the property as a homestead along with his wife, then the wife would have certain rights to the home .
In Florida, homestead rights are not only established by statute but, in fact, they are written into the state constitution. Getting around those constitutional rights is not easy.
Use of a trust is probably the only way to do so and, even then, the entire transaction would have to be carefully planned and executed in order to survive challenge by the spouse.
Another concern is existing liens on the property. If the home has a mortgage on it, you may not be able to put it into the trust.
Almost certainly, there is a provision in your mortgage that states the lender can accelerate and foreclose on the property if you transfer title without the lender’s consent.
So, be careful about that. Your lender may allow the transfer under certain circumstances, such as with a simple living trust, but that would depend upon the particular lender’s policies.
Otherwise, if you simply make the transfer without the lender’s consent, the lender will probably have a legal right to foreclose on the property.
Cars, mobile homes, boats and other motor vehicles can be transferred to your trust in similar fashion. Just as you would sell the vehicle to a third party, you will sign over the title to your trust.
I do not always recommend to my clients that they go through the trouble and expense of transferring vehicles to their trust.
For example, if we are talking about an old car that is not particularly valuable and will continue to depreciate, then there may not be any significant advantage in making the transfer.
On the other hand, in the case of classic cars and motorcycles, expensive boats, mobile homes, for example, then putting the vehicle in your trust makes a lot of sense. You would be wise to protect the asset from creditors and control how it is disposed after your death.
Cash & Personal Property
Usually, personal property does not come with a title, so the process is a bit different.
Cash used to be easy to put in a trust. You would simply have a bank account opened in the name of the trust and keep the cash there. The only that has changed is that it is getting difficult to find a bank that will open an account for a trust.
There is no particular reason I know for the change in policy. Presumably, it has something to do with the new laws and regulations. In any event, if you are unable to make it happen, contact my office. We have a bank that will work with us in this regard.
As for personal property, there are two things you can do. First, include an attachment to the trust document specifically listing the items – in as much detail as necessary to identify the item – as property of the trust.
It would be impractical to amend the trust document each and every time you buy something new. The solution to that is to use a Pour-Over Will. We will not get into that here because the Pour-Over Will—Trust Combo is the subject of the next article in this series.