What are the steps that need to be taken to transfer accounts into trust? Here’s your guide.
After you have prepared a revocable or “living” trust, you want to be sure to transfer title of certain assets into trust. Generally, these assets include bank accounts, brokerage or mutual fund accounts, certificate of deposit accounts, dividend reinvestment accounts, your safe deposit box, and title to real property. For other assets such as Individual Retirement Accounts (IRAs), 401Ks, pensions, annuities, and life insurance, which are considered “non-trust” assets, you want to be sure that you have designated a primary and secondary beneficiary, and that such designations are current and consistent with your overall estate planning goals. Sometimes, the trust is named as your primary or secondary beneficiary. However, this article is not intended to provide instructions on how to title various assets. That is a case-specific question which depends on the specifics of each person or couple’s estate plan. Feel free to call our office at (805) 668-4688 if you have questions regarding how to properly title assets.
This article is intended to provide guidance as to how to transfer certain accounts into trust in the State of California. Each step below assumes that you have executed a valid revocable trust and are now ready to transfer accounts into trust.
Step One
Take your signed and notarized certification of trust along with select pages of your signed and notarized revocable trust document to your financial institution. By law, under California Probate Code Section 18100.5, a certification of trust is intended to certify the existence of the trust, the identity and powers of the trustee, the manner of taking title to assets, and to summarize some of the more important provisions of the trust so that the trustee can deal with third parties, such as financial institutions, stock transfer agents, brokerage houses, title companies, insurance companies, and others, without disclosing the entire trust, which is a private and confidential document. Thus, the only pages of the trust that must be provided to the financial institution – so long as accompanied by a certification of trust – include the cover and signature pages of the trust, the pages that state the identity of the trustee, and the pages that list the relevant powers of the trustee. If you are not concerned with keeping certain aspects of the trust confidential from the institution, you can provide a copy of the whole trust along with the certification of trust. Some institutions may require you to execute an institution-specific certification of trust form.
Step Two
Tell your account representative or financial advisor that you would like to change your account(s) into your name as trustee of your revocable trust. For married couples or registered domestic partners, ask that the account be changed to your names as trustees of your joint revocable trust. Depending on the institution, they may be able to rename your existing account. Others will require you to open a new account in the name of the trust. Note that this can require changes to existing automatic deposit or withdrawal arrangements.
Step Three
Complete the paperwork that your account representative or financial advisor asks you to fill out. If you don’t want your signature card to read your name as trustee of your trust (which may be quite long), you may request that checks for new accounts just show your name and not indicate that you hold the account as trustee of your trust.
Step Four
Make sure you have done this with each and every account you own that can be and should be transferred into trust. Many clients prefer to keep a small household checking account in their individual names, especially if that account is set up for automatic deposits or withdrawals. However, it is recommended that you limit the combined balance in all accounts held outside the trust in your individual name to under $20,000 (again, this does not include or address non-trust assets such as retirement accounts). Preferably, only one or two accounts could be kept in your individual name. Such accounts should also have a transfer on death (TOD) or payable on death (POD) beneficiary or beneficiaries. Otherwise, over time, the total value of assets held in various accounts outside of trust may increase without you noticing it. Under current law, a court-supervised probate proceeding may be necessary to transfer your assets on death if the total value of assets held outside the trust exceeds $166,250. The $166,250 threshold does not include certain assets such as assets with beneficiary designations or assets held in joint tenancy. The last thing you want to do is unintentionally trigger the probate process because you did not provide a “home” for your asset, i.e., it was not properly titled or given a beneficiary, as this would negate one of the main purposes of preparing a trust in the first place. If you have any questions, feel free to contact our office for guidance.
This article is not exhaustive, does not discuss other types of trusts (for example, irrevocable trusts), or all elements of a complete estate plan, which would likely entail preparation of advance healthcare directives and financial powers of attorney. It merely discusses general processes pertaining to transferring various accounts into trust. The information contained in this article is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Accordingly, the information in this article is provided with the understanding that the authors and publishers are not herein engaged in rendering legal advice. As such, it should not be used as a substitute for consultation with an attorney. Before making any decision or taking any action, you should consult a licensed attorney.
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