A living trust, revocable trust, or asset protection trust can be a great estate planning tool that offers a number of benefits, such as allowing assets to pass to beneficiaries without going through probate and avoid the claims of creditors. Once a trust has been created, the testator must then fund the trust.
To fund the trust, the trust maker (Settlor) usually transfers assets into the trust. A trust can be funded with almost any type of asset, such as: cash, stocks, bonds, real property, or even personal property. Out of state property can also be used to fund a trust, but will require a different process. Real property (land or homes) requires a deed to be transferred into the trust.
How do you transfer assets to the trust?
There are three ways to transfer assets into a trust account, which include changing the title or ownership in the property to the name of the trust, assigning ownership rights to the trust, or making the trust the beneficiary of the property. Real property, such as real estate, a person can transfer through a warranty deed or a quitclaim deed. A warranty deed provides a guarantee that the seller has clear title to the property being sold, and there are no liens or encumbrances on the property. If you change the beneficiary designation on the asset, it will not become a trust asset until you die.
Many people often own property in more than one state, including states in which that person does not reside. Depending on the client’s situation, we often recommend a person fund a trust with all real property or assets which are located out of state or else probate will become necessary in each state where the real property is located. Multiple probate processes can be expensive and time consuming for the beneficiaries.
All 50 states will recognize a trust regardless of which the state the trust was created in. This means that out of state property placed in a trust will also escape probate in the state the real property is located. One consideration when property is transferred from out of state is the tax implications of the transfer.
Every state has its own laws regarding the conveyance of real property, including the funding of a trust with real property. Title insurance companies and banks also have their own rules and requirements that must be met before a transfer of real property will be accepted. For more information, contact the Law Office of David Goldman PLLC today.