Title

Text Resize
Print
Email
Subsribe to RSS Feed
Sunday December 17, 2017

Personal Planner

How to Fund Your Living Trust

How to Fund Your Living Trust

A revocable living trust is one of the principal estate planning methods. While everyone should have a will, there are many benefits of a revocable living trust. For individuals who have moderate or larger estates, the revocable living trust can receive and own your property. For that reason, a revocable living trust is a good centralized method for managing your property.

If you as a senior person are unable or unwilling to manage your assets, the individual you've selected as successor trustee will take over and manage property for you. Not only does this protect you, the property will eventually pass to your heirs and bypass probate. The probate savings could be many tens of thousands of dollars.

A primary benefit of the living trust is that it avoids a conservatorship. If you have only a will, own substantial assets, and become unable to manage your property, it may be necessary to conduct an expensive and lengthy court process to appoint a conservator of your assets.

For example, comedian Groucho Marx had a will. But in his mid-eighties, he no longer was competent to manage his property. There was a major court battle between his family members and a long-time companion over who should be appointed conservator of both him and his property. The court battles consumed large sums of money and led to a very awkward and humiliating spectacle that was bewildering to Groucho Marx.

If Groucho Marx had created a living trust and transferred his property to that trust, then his selected successor trustee could have managed his property during his senior years.

Funded or Unfunded Living Trust?


It is possible to create a living trust that is unfunded during life. Together with the living trust, you would then sign a pour-over will. The assets that you possess at death would go through the probate process. However, the pour-over will may transfer those properties to the living trust. This property is then used according to your trust provisions to benefit your selected heirs.

The disadvantage of the unfunded trust is that you do not avoid probate. Your estate will pay the full probate costs. In addition, you give up the potential protection of a successor trustee during life. It is only if your assets are transferred to the trust that a successor trustee can then manage them for your benefit. The unfunded living trust, therefore, could lead to a conservatorship, as was the case with Groucho Marx.

Funded Living Trust


There are several different types of assets that will be transferred to a living trust. You will need to work with your attorney and other advisors to make certain that your property is correctly placed into the trust.

Title to your property is determined by state law. You will need to comply with the appropriate agreements or documents to make sure that title is held by the trustee. In most cases, you will serve as the initial trustee of the revocable living trust. Therefore, real property and other assets will be transferred from you as an individual to you as trustee of the trust.

Real estate is often the principal asset that is transferred to the trust. This is normally accomplished through a warranty deed or grant deed, depending upon your state. The property is transferred directly from you as an individual to you as trustee. Deeds are notarized and then recorded at the county registrar of deeds.

There are considerations that you should discuss with your attorney before transferring your home or other real property into your trust through a deed. There may be a reassessment or increase in the property tax, or there may be transfer taxes when deeds are recorded. In most states, the popular living trust has been protected from an increase in property taxes. However, you should check with your attorney.

Guidelines for Living Trust Property Transfers


1. Your Home: Even though your home is transferred to a living trust, you still qualify to deduct the mortgage interest paid on the home. If you later sell the home and have made it your principal residence for two of the past five years, you will be able to exclude $250,000 for a single person or $500,000 of capital gain for a married couple. In addition, most states permit you to live in the home and qualify for a homestead exemption reduction in your property tax, even though the home is now titled under the living trust.

2. Securities: Public stocks and bonds can be transferred directly to the trust. You may hold title to the bonds in trust or you may create a trust securities account that holds stocks and bonds.

3. Safe Deposit Box: If you have a safe deposit box, that can be taken out in the name of the trust. However, some institutions that maintain safe deposit boxes require a certified copy of the trust to be kept on file. Another option may be to give your successor trustee signing authority on your safe deposit box.

4. Real Estate: If you own real estate in your home state or other states, it should be transferred to the trust. If you pass away with real estate owned in your individual name in another state, it will require a rather expensive probate proceeding in that state to transfer the real estate. However, if it is transferred to your revocable trust, then you avoid that foreign state probate proceeding and cost.

When your home or other real estate is transferred to the trust, there may be a requirement to send a copy of the trust to your lender. Most title companies and lenders will accept a short "affidavit of trust" that can be prepared by your attorney. This indicates that the trust is a qualified living trust and the trustees have the power to transfer real estate.

5. Tangible Personal Property: A common question is whether tangible personal property should be included in the trust. It is possible to transfer your cars, boats, recreational vehicles or art and other collections to the trust. However, many individuals choose to retain personal ownership of tangible personal property. This is frequently the case because you may periodically buy or sell vehicles or other tangible personal items. By not transferring tangible personal property to the trust, it simplifies lifetime transfer of those items. However, if there is extremely valuable tangible personal property that would be subject to substantial probate cost through your will, then it may be appropriate to transfer that property to the trust.

What if you would like to sell trust property? It is entirely possible to transfer property from the trust to a new person. The trustee may simply deed the property directly to an individual.

In some circumstances, your attorney may think that it is better for title insurance purposes for you to sign two deeds. One deed is from you as trustee to you as an individual. The second deed would be from you as an individual to the new buyer. There may be a modest transfer tax cost for both deeds, but this is an acceptable strategy for simplifying the transfer of real property.

Published December 15, 2017

Print
Email
Subsribe to RSS Feed

Previous Articles

Living Trust - Life and Death Decisions

Your Living Trust Choices

Bequests to Your Favorite Charity

Living Trusts Versus Wills

Ten Reasons to Update Your Estate Plan

scriptsknown

Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

"Many students take for granted what a university has to offer. However, I am thankful every single day for the opportunity to attend this prestigious school. At Lawrence, you have the ability to engage in Socratic debates about the world we live in at dinner, play recreational or NCAA sports, and talk one on one with brilliant professors. At Lawrence, you don't just 'learn' a subject, you are immersed in it. You dive into the liberal arts and these professors show you the beauty in it all, and how everything is tied together. I am a Biochemistry major with a soft spot for rocket science, philosophy, and evolution. Lawrence is my dream school, and it would have never been possible without the Dr. Irving Auld and Dorothy Roher Auld Scholarship. I am forever grateful for their generosity."

Max Loebl, 2017
Grace Gates Scholarship and Schade Family Scholarship

"Lawrence has been a life changing opportunity. My experience here is made possible by the Grace Gates Scholarship and the Schade Family Scholarship. I will always be grateful for the generosity that made my life at Lawrence a reality. I am incredibly thankful for the amazing education and lifelong connections I have made here. Beyond a doubt, my time at Lawrence has been a multifarious experience; playing varsity soccer, working in the Volunteer and Community Service Center, and now serving as the President of the Lawrence University Community Council. The times spent at Lawrence will be carried with me and cherished for the rest of my life."

Magdalen D'Alessio, 2017
Lillian Seybold Wells Memorial Scholarship

"Hello, my name is Magdalen D'Alessio, I'm majoring in Psychology and minoring in Education Studies and History. I am extremely thankful to be a recipient of the Lillian Seybold Wells Memorial Scholarship as I have been able to further my education and pursue my extracurricular interests, including Dance Team, and participating in the many International programs offered on campus. I'm really glad to be able to attend Lawrence and hope to expand my knowledge of the world even further! In the near future, I plan to conduct an independent study regarding the relationship between the government and school systems and the importance of parental involvement!"

Joe Johnson, 2017
Amy Aplin Larsen Scholarship

"The Amy Aplin Larsen Scholarship has allowed me to pursue tons of opportunities at Lawrence as part of a liberal arts education. I have been able to take classes from close to a dozen different academic departments, perform in ensembles and theatre productions, and take part in shaping the Lawrence community. Regardless of what field I may go into, the connections I have made here at Lawrence with staff, faculty, and friends have been invaluable. Thank you!"

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Kaitlin Yorde, 2017
Maurine Campbell Endowed Scholarship

"I am so thankful to be a recipient of the Maurine Campbell Scholarship. I am the first person in my family to attend a four-year college, and this would not be possible without the scholarships I receive. At Lawrence there are so many wonderful opportunities and learning experiences available. This summer I was able to participate in research in my field and have also been able to get involved with the Appleton community through ESL tutoring at the Fox Valley Literacy Council. I am sure that the Lawrence education I have received will continue to benefit me for the rest of my life!"

LarryU Facebook Twitter Instagram YouTube

© Copyright 2017 Crescendo Interactive, Inc. All Rights Reserved
PRIVACY STATEMENT
This site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice.
For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.