Keystone Lawfirm and Wealth partners

Funding your estate plan

I cannot overemphasize the importance of having a fully funded estate plan.  An unfunded or partially funded estate plan does not pass according to your will or trust.  These instructions are written to help you fund your estate plan.

If you have a will-based plan, all of your assets must also be coordinated with your wishes.  Owning an asset in your personal name will guarantee that it will pass to the beneficiaries named in your will.  Likewise, coordinating the beneficiary designations on life insurance and retirement accounts is required because these assets will not normally pass according to instructions in your will.

If you have a Revocable Living Trust, you need to change ownership of the title of most of your assets from your name as an individual to your name as trustee.   For assets such as life insurance and retirement accounts, you change the beneficiary to distribute those assets either to your spouse, your trust or directly to the beneficiary upon your death.  Your financial advisor, CPA, broker or life insurance agent will be very useful when you change beneficiaries.

NOTE:  After you receive confirmation that each asset is “funded”, place a copy of the statement in your portfolio binder behind the “TRUST ASSETS” divider.

Titling Assets In Your Name As Trustee

Title to all of your currently owned and newly acquired assets should be put in the name of your trust.  We prefer the following format for titling assets in the name of your trust:

<<Your Name>>, Trustees of the <<____________>> Revocable Trust dated <<________>>, and any amendments thereto.

Instructions for Transferring Specific Assets

Cash Accounts

You should sign new signature and ownership cards to retitle any sizeable bank accounts or cash equivalents, including treasury bills, money market accounts and certificates of deposit, to name yourself as trustee of those accounts.  You need not change any small joint or other checking accounts used primarily for household expenses.

Before you retitle your certificates of deposit, consult with a bank officer to make sure that the institution does not consider the change in account name to be an “early withdrawal” that incurs a penalty.  Generally, this should not be a problem because your tax identification number for the account will remain the same.

Instruct your financial institution by letter or in person to change the title to your trust.  The tax identification number (your Social Security number) on the account for withholding and reporting purposes will remain the same.  For joint-trusteed trusts, be sure to give each trustee signature power with respect to the account.  The new signature cards should be signed by you as Trustees.

Retitling the account records should have no effect on the name you wish to have printed on your checks.  There is no reason to have the name of your trust on your printed checks. Ask your bank to continue to print your individual name on the checks.

Investment Accounts

If you hold publicly traded stocks and bonds that are already in brokerage or investment accounts, contact your brokers or custodians and direct them to change the title of the accounts to the name of your trust.  The procedure for doing so is exactly the same as the procedure for retitling cash accounts set forth above.  You may have to complete new account applications and present a copy of your Affidavit or Certification of Trust in order to change the title. Title to the accounts should be in the trust name.

Stocks and Bonds Not Held in Investment Accounts

If you possess original stock or bond certificates, there are two ways to transfer the certificates to your trust:

Open a brokerage or investment account in the name of your living trust and deposit your original certificates in the account.  (You may later have your broker deliver the certificates to you made out in the name of the trust if you wish.) Your future account statements, which will be titled in the name of your living trust, will prove your ownership of the transferred stock or bonds.

Work directly with the transfer agent for the stock or bond and direct the agent to reissue your stock with your living trust named as the new owner.

Stock Options

Transferring or assigning stock options requires a careful analysis of the tax and legal issues. We recommend you contact your CPA and your stock plan administrator to inquire about your choices in assigning your interests to your living trust.

Personal Effects

Tangible personal property refers to such items as household furnishings, appliances and fixtures, works of art, motor vehicles, pictures, collectibles, personal wearing apparel and jewelry, books, sporting goods, and hobby paraphernalia. Your tangible personal property has been transferred to your living trust by the Assignment signed with your trust.

Your personal vehicles can be titled in the name of your living trust, but we find that most of our clients prefer to leave their vehicles outside their trust for several reasons. One, should they have a vehicle accident, the fact they have a living trust could cause the other parties to the accident to assume they have deep pockets and encourage a lawsuit. Second, heirs can usually transfer vehicles without formal probate proceedings.  If you decide to title your vehicle in the name of your trust, consult your casualty insurance agent to make certain the transfer will not result in a business rating on your insurance policy which would increase your premiums.

Retirement Plans

You should never transfer the ownership of a qualified retirement or pension plan or individual retirement account to your living trust. Instead, if you have pre-retirement death benefits under such a plan, our general recommendation is that you choose from among your spouse, children, or partner as primary and contingent beneficiaries.

Making the proper beneficiary designations for retirement plans involve many complex tax and individual family issues. It, therefore, is difficult to make a recommendation without further consultation. You have many trade-offs to consider in naming your beneficiaries – tradeoffs that affect your required minimum distributions and the taxation of your benefits after your death.

Your retirement plan administrator should send you a letter confirming the change of beneficiaries in your retirement plan records.

Qualified Tuition Plans (“529 Plans”)

It often makes sense to transfer a 529 plan to your living trust, but it’s very important that your trust contain specific language enabling the trustee to manage the account. We recommend that you contact us before naming your trust as an owner of a 529 plan.

Life Insurance Policies and Annuities

You may want to tax proof your major life insurance policies by creating one or more irrevocable life insurance trusts. In any event, you will probably want some policy proceeds paid directly to your living trust.

If you decide to name your living trust as the beneficiary of a policy, please consider that your policy beneficiary designation, not your will and living trust, controls the disposition of the policy benefits.

Generally, you should designate your living trust as the beneficiary of your life insurance policies so the policy proceeds will be governed by the terms of the living trust. To do so, we recommend you contact your insurance agent and advise him or her you want your living trust as the beneficiary. Your agent will make the change for you or provide you the beneficiary designation form for you to complete.

If you name your living trust as the primary beneficiary, you should name your spouse, partner, or children as the secondary beneficiary.

Your insurance company should send you a letter confirming the change of beneficiaries in your insurance policy or annuity records.

Mortgage, Notes, and Other Receivables

If you have loaned money to anyone, you should assign your interest as lender to your living trust by a written document and notify your debtor of the assignment.  We can prepare assignment documents for each interest for your signature.

Partnership Interest

If there are no restrictions in your general partnership agreement, your interest in the general partnership should be transferred through a written assignment of interest signed by you and acknowledged by your partners. Transfer of an interest in a limited partnership is accomplished in the same way as the transfer of a general partnership interest. We can prepare assignment documents for each interest for your signature.

Corporate Business or Professional Interests

You should contact your corporate counsel or ask us to assist you in transferring your professional business interests to the living trust. If your business is a corporation, you will have to cancel shares held in your name and reissue them in your name as trustee of your living trust.

If your business is a limited liability company, we will draft assignment documents to assign your interest to your living trust.

Sole Proprietorship Business Interests

A sole proprietorship is a business entity owned by one individual. Ownership of a sole proprietorship can be transferred to a living trust with a written assignment of interest. All items of tangible personal property should be listed individually or by category in the assignment.

Oil, Gas, and Mineral Interests

The method of transferring interests in oil, minerals, and gas depends on whether you own or lease the interests. Generally, if you own the interests, you should record a deed which titles your interests to your living trust. If your interest is a lease, you should assign your rights as a lessee to your living trust by a written assignment.

Real Property

Transferring your real property to your trust will require consideration of ownership and tax issues based on the nature of the current title to the property. Ultimately, the transfer will require preparing, executing and recording new deeds for each property. This should be done through an attorney. At your request, we will assist you with this.

Anticipated Inheritance, Gift, or Lawsuit Judgment

If you are the beneficiary of an estate of someone who has already died, or if you are a plaintiff in a lawsuit, you can assign your interest in the estate or lawsuit to your living trust in case you are disabled or die before receiving distributions or payments.

As with any legal decisions, “funding” your estate plan requires many intricate legal, tax and personal decisions and should be made with care.  If there are any funding questions that you would like specific advice about, please call our office.

"Without counsel plans fail, but with many advisers they succeed." Proverbs 15:22