The revocable living trust is a popular way of avoiding probate. However, creation of the trust doesn’t automatically circumvent the probate process. It’s all about title. How is title held? Each asset that is held in your name alone will require a probate, which can be unnecessarily costly and time consuming. That is why titling your assets is so important.
An estate planner’s responsibility is to work with you to create an estate plan that embodies your goals and protects you. He or she should also outline for you which assets should be transferred to your trust, and the method(s) by which transfer of those assets can be accomplished.
There are four main asset categories (though, please note that there are many more, and you should discuss with your attorney any asset type that is not listed here). They, and their transfer methods, are as follows:
- Real Property. Most real estate should be transferred to your revocable living trust. To do this, your attorney will draft a new deed reflecting the name of your trust, and you will sign it in front of a notary. The deed will then be recorded in the county were the property is located.
- Bank Accounts, Savings Accounts, and Safe Deposit Boxes. The transfer of these types of accounts should be done on a case by case basis. In some cases, simply designating a beneficiary on the account will allow the account to transfer by law (and not be subject to probate). However, if your attorney advises you to go ahead and transfer the account to your trust, you can do so using a copy of your executed Certificate/Certification of Trust. The bank will want to see all pages, including the notary page, to confirm the existence of the trust, the date it was executed, and other pertinent information.
- Stocks & Bonds. Transfer of stocks and bonds will require a different procedure, depending on whether the assets are publicly or privately held. The transfer of privately held securities can be accomplished by surrendering your stock certificates and having new certificates prepared in the name of your trust. There are some intricacies involved here, so it would be best to work with your attorney. Transferring publicly held securities will require working with your stockbroker or the institution where the assets were purchased.
- Retirement Plans. This asset is best transferred by beneficiary designation. Doing so will circumvent probate (like some bank accounts, which allow you to designate a beneficiary) because the asset will transfer by law. In other words, transfer to the trust is not generally advised. Also, keep in mind that changing a beneficiary of this type of asset could have income tax consequences, so it is best to consult with an attorney prior to making any changes.
This rough guideline to the four main asset groups should give you some idea of what you will need to do to make sure your estate plan is protecting you to the highest extent possible. If you have questions or have another type of asset not listed, you should contact the attorney who drafted your estate plan and clarify your course of action.