Establishing a living trust is a suitable instrument to protect yourself in case of illness, mental incapacity, and avoiding the probate process at death. You’ll transfer property into the trust and name yourself as trustee, in order keep control of it.
Once your living trust has been established, the next step is to fund it. But what can, and should, you add? Here, we offer some suggestions to consider for funding your trust.
This includes the usual things, such as:
- Books, photos, and other personal effects
- Household goods, such as furnishings, artwork, etc.
- Personal tech, such as laptops, desktops, smartphones, tablets, etc.
- Cars, trucks, and other motor vehicles*
- Pets, including horses and cattle
*Note that in Illinois, you do not have to go through probate in order to transfer the motor vehicle title. The owner can designate a beneficiary through the Secretary Of State ahead of time. Alternately, if no beneficiary was designated before death, a beneficiary can use a Small Estate Affadavit or an attorney’s affidavit to begin the process of changing the title. More information on the process is available here from the Secretary Of State’s website.
This can include:
- Cash accounts and bank accounts designated “Payable On Death”
- Money markets
- Monies you are owed, including:
- Loans you’ve made to others, secured and unsecured
- Mortgages you hold on someone else’s real estate
- CD accounts
- Before adding to your trust, check with an experienced estate attorney to avoid paying an early withdrawal penalty on the funds. Depending on your bank, the movement may require a re-titling, which will include withdrawal.
- Non-qualified annuities, which will be re-titled as the name of your trust. The trust can also be named a primary or secondary beneficiary.
- Non-retirement brokerage and investment accounts, although changing the beneficiaries may be a more suitable option to avoid withdrawal penalties.
- Stocks and bonds held in certificate form, which requires that you return the original certificate to the stock transfer agent in exchange for a new certificate. It will also require you to obtain a “Medallion Signature Guarantee” on the stock transfer form, mail your original certificates via registered mail and insuring them for 2% of their current fair market value. Alternately, you can also deposit your certificates into a brokerage account that’s titled in the name of your trust.
- Business interests, including:
- Membership interests in LLCs
- General and limited partnership interests
- Shares of stock in a closely held company
Make sure to check all agreements regarding transfers and instructions on retitling before transferring to your trust.
- Real Estate
- Copyrights, Trademarks, Patents, and Royalties
- Oil, gas and mineral rights may require a new assignment or new deed
Having pets is a very personal thing for most people, and the animals are considered family members. Divorcing couples frequently bicker over pets, and sometimes the couple’s pet ownership is decided by a judge.
Beloved pets frequently show up at animal shelters nationwide after an owner passes because family members don’t want it. The animal is frightened without the human owner, and may end up euthanized as a result. But you can make plans for your pet, including establishing a trust, either with your living trust or separately from it, to ensure your pet is well cared for after you’re gone.
The average life of a dog is 7-11 years, and indoor cats live 13-17 years. But it’s not uncommon for cats to live more than 20 years, and occasionally as long as 30 years or more. When creating a living trust, you can also add funds and provisions for your animals’ care when you die, become disabled, or are no longer able to care for them. You can set up a pet trust for the usual types of house pets as well as trusts for larger animals such as horses and cattle.
What You Should Not Put Into A Living Trust
There are better ways to handle these items than adding them to a living trust.
- Qualified retirement accounts, including 401(k)s, 403(b)s, IRAs, and qualified annuities. A better option would be to change the beneficiaries, since re-titling will be considered a withdrawal.
- Life insurance—change owner’s name to the trustee of the trust instead. Check with an estate planning attorney to ensure that there are no tax consequences.
- Medical and health savings accounts, which are tax-exempt accounts used for qualifying medical expenses not paid by insurance. Designate the trust as the primary or secondary beneficiary instead, since they can’t be retitled.
- Uniform Transfers to Minor Accounts (UTMAs) or Uniform Gifts to Minor Accounts (UGMAs)—these are established for the benefit of minor children. However, the child is considered the sole owner of the account instead of the custodian or person who establishes the trust. Better—name a successor custodian for the accounts so that a court hearing can be avoided if the primary custodian dies.
These are just some of the things to consider when funding your living trust. Work with an experienced estate attorney to determine what’s right for you, your family, and your overall estate planning.
Chicago’s Living Trust And Estate Planning Attorney
James C. Provenza has more than 25 years of estate planning. He helps clients in Illinois with wills, living trusts, revocable trusts, and overall estate plans. He can work with you to ensure that your final wishes are carried out, and that your money and property are protected for your beneficiaries. Call our firm today at (847) 729-3939, or use our online contact form.