Asset Integration Part I- How you own your assets really does matter

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.