What Are Living Trusts?

By Author: Heather Tremain
Total Articles: 1
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Many clients who have created trusts never "fund" them because most attorneys do not assist them. Funding is the process of placing all the appropriate assets inside of the Trust. Failure to fund your trust means the assets may go to probate anyway.

Funding a trust takes time and perseverance with one's financial institutions. It means filling out forms and waiting in line at banks to sign signature cards. The hardest part is answering all the legal questions on the all the legal forms. For example, naming beneficiaries of a retirement account (an IRA or 401(k)) can be very tricky if you have trusts in place and usually requires legal advice so as not to upset the tax deferred treatment of the account now or after your death. This can be daunting even if your attorney is holding your hand through the process.

Many of my clients ask, "What goes into a trust?" The answer is, "everything" unless there is a reason to leave it out. So the better question is "What should NOT go into a trust?" Retirement accounts should not be transferred to a trust during your lifetime. Most of my clients leave their vehicles outside ...
... the trust because they find it is just easier.

I've noticed that people often forget to deal with the following assets:

* Real estate or mineral rights outside the state of California
* Timeshares
* Life Insurance Policies
* Homeowner's Policies
* Employee death benefits
* Online or virtual assets (such as Kindle or Itunes Libraries)
* Safe deposit boxes
* Checking accounts (because they think they're too small to worry about)
* Assets held in joint tenancy with siblings, inherited from parents
* Tangible personal possessions (furnishings, etc)
* Airplanes, boats, cattle, royalties, litigation proceeds
* Sole Proprietorships and other businesses
* US Savings bonds
* Stock certificates

If you can't change your asset titles or beneficiaries online, then start by sending a letter to each of the financial institutions. They will send you a form in the mail. Complete the form and send it back to them. The form letters for each type of asset are provided at our website as is a "Funding Instruction Letter" to help you know what to do.

Most people have their trust own their life insurance and also name their trust as the beneficiary of their life insurance. Be aware that life insurance is part of your taxable estate, which means estate taxes may be due upon your death. In 2013, unless a new law is passed, the maximum each person can pass estate tax free is $1 million total. Everything beyond the first $1 million is taxable at 50-55%. If you are concerned about this, you may want to create an irrevocable life insurance trust to hold the life insurance benefits outside of your taxable estate.

Attorney Heather Tremain has focused her law career on Estate Planning, Trusts and Probate Law since 2000. For five of those years, she was a Specialist in those areas, Certified by the State Bar of California, Board of Legal Specialization. Attorney Tremain was featured in Forbes Magazine in December 2009, as one of 10 "Leading Providers" of legal services in the State of California. For more information, see http://www.yourlegacylives.com/california-living-trusts/.