A Living Trust provides one of the most flexible ways
to plan your estate. A Living Trust can appoint a successor in the event of
your disability, provide estate tax and asset protection benefits for loved
ones at the time of your death, and avoid probate at the time of
administration.
The process of transferring assets from either
individual or joint name to the name of your Living Trust is called "trust
funding" or "asset integration."
Assets owned by a Living Trust can be styled a number of ways to
adequately identify the trust. Most importantly, the asset title should
identify the trustee(s), the trust name, and the trust date. Handling of trust property is not complicated;
the Trustmaker continues to control all of the investment decisions, including
distributions of income and principal and there is complete transparency for
income tax purposes as the trust uses the Trustmakers social security
number. The primary difference is assets
are now titled in the name of the trust, or the trust is designated as
beneficiary of assets like insurance, annuities and retirement plans. This asset
integration series will discuss how a Living Trust should own the various types
of commonly owned assets.
Cash Accounts
“Cash accounts” include those accounts held at banks and credit unions,
like checking, saving and money markets. They may also include accounts held in
conjunction with an investment account at a brokerage firm. The funding of
these accounts is generally done in person with the cooperation of your
financial institution. Typically,
account documents are executed or amended to adjust the institutions internal
records. Following is a discussion
highlighting some of the concerns regarding the re-titling or transfer of cash
accounts to a trust, such as opening a new account, loss of privileges,
penalties or loss of accrued interest, printing new checks, direct deposits,
tax identification numbers and FDIC insurance.
Many
clients ask if a new account will need to be opened in order to reflect the
transfer of ownership from joint or individual name to the name of the trust. This
notion is usually met with resistance since many bank accounts have automated
features such as direct deposit and automatic bill pay. Most banks or credit unions will simply
change the name on the account to reflect the new ownership in the trust.
However, cash accounts linked with investment accounts may require that the
original account be closed and a new trust account be opened.
There should be no loss of privilege to the cash account by funding it to
the trust. Privileges such as senior citizen discounts, ATM privileges, free
checking privileges and the like for accounts held in trust ownership may
remain in place. However, prior to
funding any cash accounts, it is important to verify with the institution of
your choice that there will not be any loss of account holder privileges as a
result of the transfer.
Some
banking institutions may impose a penalty for transferring a certificate of
deposit (CD) prior to its maturity date.
Generally, the branch manager has authority to waive the penalty. Prior to funding any CDs we suggest you verify
that there will not be any penalties or loss of interest imposed as a result of
the transfer.
Most
financial institutions will provide their customers with a substantial degree
of latitude as to what information is printed on the face of their checks. There is no legal requirement that the name
of the trust be printed on the checks.
Many Trustmakers prefer not to disclose the nature of their estate
planning on the face of their checks and continue to use their old checks until
time to re-order.
Since funding a cash account is an internal procedure within most financial institutions, changing the name of
the account and not the account number, this transfer or re-titling should not affect
automatic
electronic deposits or withdrawals associated with the account. These might include direct deposit of Social
Security, pension and payroll checks, mortgage and home equity line of credit
payments and debit cards.
Occasionally,
institutions will ask for verification of the tax payer identification number
prior to effectuating a change of ownership. Under the Treasury Regulations, [Treas.
Reg. 1.671-4] the Trustmaker is required to use their social security number as
their tax payer identification number so long as the trust is revocable, the Trustmaker
is one of the trustees, and the Trustmaker is not disabled. If all of these conditions are met, the Trustmaker
can satisfy the transfer agent by completing a W-9 form and continuing to use
their Social Security number.
Transferring cash accounts to a trust should not result in
the loss any of the benefits associated with the FDIC insurance coverage. In fact, in some situations, changing the
ownership of your bank account to the name of your trust may actually increase
your amount of FDIC insurance coverage.
The Law Offices of Hoyt & Bryan assists families in the
protection of their loved ones by focusing their practice in the areas of
Estate Planning, Probate and Trust Administration, Elder Law including Medicaid
and VA Planning and Special Needs Planning, Pet Planning, Business Succession
Planning and Real Estate. The founders, Peggy Hoyt and Randy Bryan, are
both dual board certified by the Florida Bar in Wills, Trusts and Estates as well
as Elder Law. Hoyt & Bryan is the only law firm in Florida with the
distinction of two attorneys with these certifications. We offer many
complimentary educational workshops each week in our Learning Center at The Law
Offices of Hoyt & Bryan and monthly workshops in the Auditorium of One
Senior Place in Altamonte Springs. For more information please contact our
office at 407-977-8080 or visit our website
HoytBryan.com.
