The Right Title for Your Revocable Trust Assets
Its a new year and its a good time to make sure that your assets are properly titled in your revocable trust. Properly titling assets is how a trust actually works to avoid the cost of probate or delays when needing to use assets during illness or after death.
The title or ownership should reflect that the Trustees own the property; for example: John and Jane Doe, as Co-Trustees, of the Doe Revocable Trust dated [insert date of signature]. The date that the trust agreement is signed becomes part of the name of the Trust, even if the trust agreement is later amended.
Real property should be titled with a Warranty Deed. If a Quit-Claim Deed is used, then you may have limited the protection of your title insurance. Deeds may look simple but some large legal problems can occur when small items are left out; such as failing to include marital status, listing incorrect statutory references to affidavit exemption or the use of tax parcel numbers instead of full legal descriptions.
When refinancing property, lenders often prefer to have the property titled in the owner's name instead of the trust because it is easier to sell the mortgage on the secondary market (which lenders often do). Again, use of Warranty Deed instead of a Quit-Claim Deed is preferable to protect title insurance coverage. Also, it is important to remember to deed the property back to the trust after the refinancing is complete.
A qualified retirement account cannot be owned by the trust, but the designated beneficiary can be the trust. Similarly, the trust can be listed as the beneficiary of life insurance or an annuity. By naming the trust, you can avoid needing probate if a beneficiary is a minor, whether a child or grandchild of a deceased child. A court conservatorship and court imposed restrictions will apply for any distribution to a minor that exceeds $10,000 in a year.
To verify your assets are titled correctly and to assist your Successor Trustee, keep a copy of one monthly bank statements or stock account statements with your trust documents. Then, update the statement each year. This is better than keeping a list because there is no risk of transposing account number and the contact information of the financial institution is on the statement.