Forgotten Assets Commonly Omitted from Trust funding

Having been an estate planning attorney for over 20 years I have come up with a short list of the forgotten assets that are most commonly omitted from trust funding.  That is, these assets are frequently found after death titled in individual name rather than the trust. In some cases they can be cleared up  by small estate affidavit, under $150,000 probate successions, Heggstad petitions and in some cases full probates.  However, it’s important to realize that in any of the above examples there are unnecessary attorney fees being spent. Our job is to help you avoid that unnecessary fees!  So, without further adieu, here are some assets we commonly find after death having been omitted (accidentally for the most part) from trusts.

LOANS – By far the most commonly omitted from trusts are loans. Even when secured by a deed of trust. People loan money and do not seem to put them into their trust. To clarify I am talking about when you loan money to someone else so it’s an asset and not an obligation. The promissory note and deed of trust should be payable to the trust and not to you as an individual. I bet 50% of people with notes have them in their name and not their trust name.

BONDS – People have EE, HH, and other governmental bonds sitting in their safes or safe deposit boxes. A large percentage are in their names rather than their trust names.  Before I go on, let me say that if they are small in value maybe it’s easier to cash them out. However, if larger value then get them changed into your trust name. You will need to fill out governmental forms to make that happen but I would say it’s worth it!

STOCK CERTIFICATES – People still have stock certificates in their safes or safe deposit boxes. Sometimes large numbers of shares but more often small numbers.  Stocks they received as gifts, as an employee bonus, or they liked holding the paper. In any event, I often see these in individual names rather than owned by a trust. If they are commonly traded securities you might put them into your brokerage account for simplicity!

BUSINESS INTERESTS –  Many people own a percentage of a small business. Maybe an LLC, a corporation, an “S-Corp,” a partnership or even a sole proprietorship. You should have the business records updated to reflect your trust ownership. At a bare minimum you should sign an assignment of the business interests to your trust. If the value is low it’s not a big deal but if the value exceeds $150,000 it will require a full probate to legally transfer the assets to a trust.

TIMESHARES – I understand that you had a couple mai tais when you bought the timeshare so maybe you forgot about your trust. However, eventually you remember you have a trust, right!?  I almost have to fight some clients to put their timeshare into their trust. “It’s not worth enough to worry about” is what I always hear. Ya, it might not be worth anything but it will be a headache for your kids after you are incapacitated or dead. Put it in your trust now!

There are other assets omitted from trusts all the time but the above are ones people don’t think about for some reason. They forgot about their trust with these assets. Don’t be that guy! Get it done right and get everything into your trust.

-John

Funding a bank account “in” to a California revocable living family trust

For 20 years I have been telling people how to “put” their bank accounts and other assets into their trusts.  Some things, like real estate, are pretty easy. We just prepare a deed, our client signs it, and we send it in for recording.  Clients who work with full service financial professionals also have it easy as the staff at those financial companies tend to be well trained at trust funding.

We usually start with a letter to the financial institution. If that doesn’t do the trick then we always advise our clients to go into the branch if that’s possible. Some things are just best done in person though.  I have not put a new asset into to my wife and my trust in some years.  We have had a trust for about 15 years, banked at the same credit union throughout, and never put our main bank account into our revocable trust.  What’s that story about the cobbler’s son….

Ok, the balance isn’t huge but it’s enough that it would come in handy for our successor trustee should they need money to pay bills if we are incapacitated or deceased. So we finally did it!  I actually first went in a few weeks ago but the friendly credit union employee told me that my wife had to be there since she was primary holder on the account. So for the next two or three weeks my wife and I talked about going in. Finally yesterday, Saturday, we strolled in as they opened their doors at 9:00.  The whole process took 15 minutes.

So what happened?

We handed the credit union employee our certification of trust or trust certificate or, what some call, a certified extract or abstract. In summary it’s a shortened version of your trust.  Our “CE” is usually two pages including the notary block.  In our opinion the goal of the CE is brevity and just giving the bank, credit union or financial institution what they need.  I am going with the assumption that banks and credit unions generally have the same requirements. However, is important to note that each bank or CU has their own rules. Plus, as I like to (half) joke, each bank or credit union branch may have their own rules… and of course each bank or CU employee may do things differently.  So take this for our actual experience. Your experience should be similar.

We gave the employee the CE and he proceeded to go through our account on his computer.  We have several sub accounts set up so it took him a several minutes to check boxes and enter the trust name for each one.  Then he took the name of our successor trustee, from the CE, and entered that into the computer.  He then asked for the name of our beneficiaries. I told him that in the past I have preferred to put “named individuals” as I don’t like to divulge the private information that is our beneficiaries (actually just our kids).  He explained that the NCUSIF (National Credit Union Insurance Fund) which, he claimed, is essentially the same as the bank’s FDIC gives the $250,000 per person insurance to each beneficiary.

Ok, let’s stop here for a second and take a detour. I do not know if what he says is right. Since my account has well below $250,000 it’s a non-issue for me. However, if your account is anywhere close to $250,000 you should definitely check, double check and triple check the rules.  My advice is always to have less than $250,000 at any one bank. Why take a chance with interpreting the FDIC or NCUSIF rules?  Is it really the contingent beneficiaries I asked the employee?  Why not the current beneficiaries? It doesn’t make any sense to me. So, again, let me repeat that I encourage you to never exceed $250,000 at a financial institution unless you are comfortable with their insurance rules.

So the nice and informative employee finished inputting everything and then had us sign (electronically) new signature cards confirming everything on the account and information about our trust.  It was easy.

Let me stress a couple things:

  1. Our account numbers did NOT change at our credit union (this varies among different banks and CUs);
  2. Our checks do NOT have the name of our trust on them (again this varies);
  3. It took about 15 minutes.

The key here that to have a trust and not spend these 15 minutes just exposes your loved ones to a probate after your passing or incapacity so take the time and fund that trust!

Contact us with questions.  -John

 

 

Bank of America mortgage trust certification form

For some time now I have advised clients to contact their mortgage holder to see about linking their trust to their mortgage. Without that you can leave your trustee with a problem. The house might be owned by the trust but the mortgage is not connected to the trust. When that happens the trustee can have a very difficult (if not impossible) time getting information about the mortgage.  This is a great service that Bank of America is offering and I encourage you to see if your mortgage bank has similar.  The only downside is that they are charging $100 to process the form. Here’s that form:

Borrower Trust Information and Certification Form
Borrower:
Loan #:
Property Address:
Name of Trust:
Date of Trust:
Grantor:
Beneficiaries during Grantor’s Lifetime:
Term of Trust:
Occupants of above property:

l/We, Borrower (s) _________________ certify that the Trust is an inter vivos Trust, and that l/VVe will not alienate or transfer my/our interest in the trust. l/We will remain the beneficiaries of the Trust, and retain all beneficial interest in the trust, at all times during the term of the Loan identified above.  l/We certify that the property will continue to be occupied by me/us as my/our primary residence at all times during the term of the Loan.
By SIGNING BELOW, l/We hereby certify and acknowledge that the foregoing information is true and correct.

____________________

Signature

County of

State of

On _________________ before me, ______________ a notary public of the State of , personally appeared __________________known to me to be the person(s) whose name(s) is(are) subscribed to the within instrument, and acknowledged that he/she/they executed the same.
WITNESS my hand and official seal

Notary public in and for said State
This communication is from Bank of America, N.A., the servicer of your home loan.
TrustInfoCert 6594 09/1 3/2006

Title your assets with precision

INTRODUCTION

An estate planning attorney should be precise in their work. At times clients think we are over the top at our office when we re-do something. We explain there is a reason.  If something is done the tiniest bit wrong it could be a HUGE problem later on.

TODAY’S PROBLEM

Today I am helping a client after his dad died. I will not use the real names but let’s say the guy that died was named John C. Dough.  The trust full and formal name is:

John C. Dough, Trustee of the John C. Dough Trust, Dated 5/5/85

He bought a new house some years ago and the title company prepared the deed. I have to say I am amazed how often title companies mess up deeds. The title company prepared the deed as:

John C. Dough, Trustees of the John C. Dough Living Trust, Dated 3/13/04

You see the differences?

1) Obvious typo in making trustees plural even though there is only one trustee. Not a big deal.

2) They added the word “living” to the trust name. This would not be critical if it were the only error.

3) They changed the date to a completely different date from when the trust was created. It was actually the date of an amendment but the date of the trust does not change by an amendment.

One error was not critical but two errors could be a huge problem!

The problem is this. Mr. Dough is deceased so he can not simply prepare a correctory deed as we otherwise could do.  Mr. Dough’s son has documents showing he is the trustee of the John C. Dough Trust Dated 5/5/85 and he also has an amendment dated 3/13/04. However, NOWHERE does Mr. Dough’s son have a trust agreement called the John C. Dough Living Trust with any date.

THE RESOLUTION

The first call is to the title company. Maybe they can fix it. However, I told the client do NOT let them promise everything is fine. It’s NOT and when my client’s daughter goes to sell the house in the future there will likely be a problem selling it. I believe the first option is for the title company to pay for title insurance and establish it in the proper trust name and date.

If the title company won’t do that then I have recommended to the client that he petition the Court to get a Court order establishing the property is in the original 1985 trust name and date. I would then record that order.

CONCLUSION

Use precision with your trust titling. Don’t cut corners. Don’t listen to a bank or title company who says it’s fine. It is NOT fine. Get it exactly right!

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