Free Joint Living Trust Funding Worksheet

The bill of transfer is used to transfer personal property to a living trust or joint living trust. In addition to creating and signing a living trust document, assets must be transferred into the trust. A living trust only owns the assets that are actually transferred into the trust. Any assets that remain titled in the name of the grantor will be subject to potential probate administration at the death of the grantor. Assets should be transferred from the grantor to the trust to achieve the result that the property is then legally owned by the trust. Assets can be transferred to the trust both at the time of the creation of the trust and also at later times. Separate transfer documents, such as this bill of transfer, must be used for this purpose because the trust document itself does not contain any language of conveyance or any list of assets. Note: This document cannot be used to transfer real estate or other property which has a title document, such as a vehicle.

If the asset consists of a category of items, especially those that may change regularly, for example household goods and personal effects, continuous transfers would be impractical so the initial transfer should convey that category of assets, "whether now owned or later acquired."

Assets should be transferred to "The Trustee of �[name of living trust]". Later-acquired property should also be titled in the name of the trust.

Contact the broker for assistance in re-titling the brokerage account in the name of the living trust. In order to properly re-title the account, the broker will need to know the name of the trust. Furthermore, the broker will usually want to make sure that the trust is in existence, learn the identity of the current trustee(s) and any successor trustee(s), and verify that the trustee(s) has/have the authority under the trust document to open and maintain the brokerage account. In order to provide the broker with this information, an original copy (or a photocopy) of the entire trust agreement can be supplied. However, if privacy is desired, the broker can be supplied instead with only the selected information about the trust that is needed by the broker. The simplest way to do this is to provide the broker with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. The selected pages should include those which contain the following information:

• Declaration of Trust (first page);
  
• Identity of the trustees (first page, plus other pages which describe alternate and/or successor trustees;
  
• Powers of the trustees; and
  
• Signature page (and notary page, if any).

See this program's "Trust Letter to Bank or Broker" document.

If the account is jointly owned by non-spouses, an attorney or tax consultant should be contacted because there may be gift tax implications of the transfer.

These pages of the living trust contain the key information likely to be requested by banks, brokers and corporate secretaries. The pages can be attached to a "Certification of Trust" cover sheet and provided instead of providing a copy of the entire trust document.

See this program's "Trust Letter to Bank or Broker" document.

The interests in a closely-held business can be transferred by having new certificates prepared in the name of the living trust and the old certificates surrendered. However, many closely-held businesses have restrictions in place to prevent the transfer of interests without the prior consent of the remaining owners. These restrictions, often detailed in a "buy-sell" document, are usually intended to prevent the admission of unknown third parties as co-owners, NOT to prevent the transfer of the grantor's interest to the living trust. But it is important to obtain the necessary consent prior to the transfer in order to ensure the validity of the transfer. Contact the principals of the business and/or review the restrictive agreements in order to determine whether and how a transfer can be effected.

See this program's "Stock Power" and "Trust Letter to Bank or Broker" documents.

Untitled tangible personal property is transferred into the living trust through the use of a "bill of transfer" document. Because clothing and personal effects change frequently, and continuous transfers would be impractical, the initial transfer should describe all clothing and personal effects "now owned or later acquired." Items with significant value should be separately and carefully described in the bill of transfer, even though, presumably, they are included in the generic description of "all of the grantor's clothing and personal effects." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.

Untitled tangible personal property is transferred into the living trust through the use of a "bill of transfer" document. Because collections, collectibles and antiques may change, and continuous transfers would be impractical, the initial transfer should describe all collections, collectibles and antiques "now owned or later acquired." Items with significant value should be separately and carefully described in the bill of transfer, even though, presumably, they are included in the generic description of "all of the grantor's collections, collectibles and antiques." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.

Debts should not be transferred to the living trust; the trust should hold only assets. However, including them in this worksheet may be useful information for the successor trustee.

Oil, gas or mineral rights are sometimes classified as personal property, sometimes as an interest in real estate, and sometimes as both. A transfer, therefore, may require the use of a bill of transfer, a deed, or both, respectively, and the governing entity may require that specific forms be used. It is recommended that an attorney be contacted for assistance.

Untitled tangible personal property, including household goods, furniture and furnishings, are transferred into the living trust through the use of a "bill of transfer" document. Because household goods, furniture and furnishings change frequently, and therefore continuous transfers would be impractical, the initial transfer should describe all of the grantor's household goods, furniture and furnishings "now owned or later acquired." If items are located in more than one residence, a reference to each residence should also be included.

Items with significant value, such as jewelry, untitled recreational equipment, collections, collectibles, antiques and works of art should be separately and carefully described in the bill of transfer, even though, presumably, they could be included in a generic description of "all of the grantor's tangible personal property." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.

An employee who receives an incentive stock option ("ISO") generally is not required to recognize income for tax purposes at the time the option is received, or even at the time the option is exercised, but only when the stock received is sold (or when the option is sold). Transfer of an ISO into the grantor's living trust may (a) constitute a taxable disposition, and (b) violate ISO restrictions that (i) allow only the individual employee to exercise the option and (ii) prohibit transfers other than by will or intestacy. Therefore, it is not advisable to transfer an ISO (or even the stock received by exercising an ISO) into a living trust. Contact an attorney for further advice.

To transfer non-employment-related stock options, contact the secretary of the entity which issued the options for assistance in having new certificates prepared in the name of the living trust and the former certificates surrendered. In order to properly re-title the account, the secretary will need to know the name of the trust. Furthermore, the secretary will usually want to make sure that the trust is in existence, learn the identity of the current trustee(s) and any successor trustee(s), and verify that the trustee(s) has/have the authority under the trust document to open and maintain the brokerage account. In order to provide the secretary with this information, an original copy (or a photocopy) of the entire trust agreement can be supplied. However, if privacy is desired, the secretary can be supplied instead with only the selected information about the trust that is needed by the secretary. The simplest way to do this is to provide the secretary with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. The selected pages should include those which contain the following information:

• Declaration of Trust (first page);
  
• Identity of the trustees (first page, plus other pages which describe alternate and/or successor trustees;
  
• Powers of the trustees; and
  
• Signature page (and notary page, if any).

See this program's "Trust Letter to Bank or Broker" and "Stock Power" document.

If the options are jointly owned by non-spouses, an attorney or tax consultant should be contacted because there may be gift tax implications of the transfer.

The OWNERSHIP of IRA and Keogh accounts should NOT be transferred to a living trust because such a transfer will cause immediate tax recognition of the entire account. Instead, if the grantor is single, the living trust can be designated as the BENEFICIARY of the account. But if the grantor is married, it is nearly always recommended that the spouse be designated as the primary beneficiary, and the living trust be designated as the contingent beneficiary (if the spouse fails to survive the grantor, or after the grantor's death). In this way, the spouse can elect to "roll over" the grantor's IRA to the spouse's IRA and achieve further deferral, if that is desired at the time.

Contact the custodian of each account for assistance with the beneficiary designation forms.

Note: If the living trust is designated as the beneficiary of the IRA (either as primary or contingent beneficiary), some tax-beneficial deferral of payments can often be achieved if IRS requirements are strictly followed, including, for example, providing a copy of the living trust to the IRA custodian. In short, it is possible to measure the distribution period by the expected remaining life of the oldest trust beneficiary and so extend that distribution period beyond the otherwise default period of just five years following the grantor's death. A full explanation of this matter is beyond the scope of this program. Contact an attorney for assistance.

The first responsibility of the trustee is to make certain that all of the (appropriate) assets owned by the grantor are transferred to the living trust. Any assets that remain titled in the name of the grantor will be subject to potential probate administration at the death of the grantor. (The exceptions include assets which (a) are held jointly with another person with rights of survivorship, for example a home, (b) pass pursuant to "transfer-on-death" or "pay-on-death" designations, for example a bank account, or (c) pass by beneficiary designation, for example retirement plans and life insurance.) If the initial trustee is not the grantor, it will be necessary to obtain a tax identification number for the trust and begin filing trust tax returns.

If property (for example real estate) is sold on the installment method (where two or more payments will be received), rights to the installment sale contract can be transferred to the living trust using a bill of transfer. However, check for a provision in the contract that prohibits assignments. (See this program's "Bill of Transfer" document.)

If the grantor and any another person (for example the grantor's spouse) JOINTLY sold the property which produced the installment obligation, then BOTH such sellers must be able to revoke the trust in order to avoid accelerating the taxable gain, if any, inherent in the sale because of the transfer. This is due to tax rules which deem a transfer to a trust, if it is irrevocable by the transferor, a "total disposition" of the installment obligation by that transferor, and therefore presently taxable in its entirety.

Installment obligations relating to REAL ESTATE are sometimes classified as personal property, sometimes as an interest in real estate, and sometimes as both. A transfer, therefore, may require the use of a bill of transfer, a deed, or both, and the recording agency may require that specific forms be used. It is recommended that an attorney be contacted for assistance.

The interests in a closely-held business can be transferred by having new certificates prepared in the name of the living trust and the old certificates surrendered. However, many closely-held businesses have restrictions in place to prevent the transfer of interests without the prior consent of the remaining owners. These restrictions, often detailed in a "buy-sell" document, are usually intended to prevent the admission of unknown third parties as co-owners, NOT to prevent the transfer of the grantor's interest to the living trust. But it is important to obtain the necessary consent prior to the transfer in order to ensure the validity of the transfer. Contact the principals of the business and/or review the restrictive agreements in order to determine whether and how a transfer can be effected.

It is important to respect the distinction in the ownership of trust assets -- assets owned by the trust as opposed to owned individually by the grantor. The trustee is only a caretaker of the trust assets and must keep appropriate records of income, expenses, additions and distributions of the trust. Especially when a successor trustee assumes that office, all cash should be channeled through a separate trust-owned bank account.

Untitled tangible personal property is transferred into the living trust through the use of a "bill of transfer" document. Because jewelry items may change, and continuous transfers would be impractical, the initial transfer should describe all jewelry "now owned or later acquired." Items with significant value should be separately and carefully described in the bill of transfer, even though, presumably, they are included in the generic description of "all of the grantor's jewelry." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.

In addition to creating and signing a living trust document, assets must be transferred into the trust. A living trust only owns the assets that are actually transferred into the trust. Any assets that remain titled in the name of a grantor will be subject to potential probate administration at the death of that grantor. (The exceptions include assets which (a) are held jointly with another person with rights of survivorship, for example a home, (b) pass pursuant to "transfer-on-death" or "pay-on-death" designations, for example bank accounts, or (c) pass by beneficiary designation, for example retirement plans and life insurance.) Assets should be transferred from the grantor to the trust to achieve the result that the property is then legally owned by the trust. Then, upon the grantor's death, because the trust (as owner) survives the grantor's death, it is not necessary to use the probate system to effectuate a transfer of the assets to the grantor's beneficiaries. Instead, the (successor) trustee can distribute the assets in accordance with the trust provisions.

Assets can be transferred to a living trust both at the time of the creation of the trust and also at later times. Separate transfer documents must be used for this purpose because the trust document itself does not contain any language of conveyance or any list of assets.

This worksheet provides a convenient method to list all assets owned by the grantors. With each category of assets, explanatory information is provided with which to decide whether and how to transfer the asset into the living trust. For easy reference, that same information will be printed on the worksheet with the asset category. Further, each asset can be tagged to automatically be included on (a) a bill of transfer document, (b) a trust property schedule, and/or (c) a property ownership memorandum. These documents can then be printed and used for their intended purposes. They can also be saved and updated periodically as appropriate.

It is important to distinguish between the OWNERSHIP of a policy and the named BENEFICIARY of the policy. The living trust is often named as the beneficiary of all life insurance policies. (Note: Policies provided to veterans may prohibit naming a trust as beneficiary.) By having the proceeds combined with the other living trust assets, the grantor's distribution scheme is unified within the trust.

Furthermore, if a policy insures the life of someone other than the grantor, the OWNERSHIP of that policy should also be transferred to the living trust. Otherwise, if the insured person survives the grantor, and therefore the policy is still in place at the grantor's death, that policy is an asset that may be subject to the grantor's probate administration.

Contact the appropriate insurance agent for a change of beneficiary form or change of ownership form. (See this program's "Change of Beneficiary Letter" document.)

IMPORTANT: If the grantor's estate, including assets in the grantor's living trust, and including the face value of life insurance, exceeds the federal estate tax applicable exclusion amount ($2,000,000), an attorney or financial advisor should be contacted before making any changes in ownership or beneficiary designations of insurance policies. This is because it may be possible to achieve significant savings in federal estate taxes through careful planning.

Living Trust

A Living Trust (also known as a "revocable trust") is a trust created by a person (known as the "Grantor") for use during that person's lifetime. It provides for payments of income for the Grantor and the distribution of the remaining assets of the Trust upon the Grantor's death. The Living Trust also includes an option which allows the Grantor to amend or revoke the Trust at any time. Married persons can establish either separate living trusts, or a joint living trust for their combined benefit.

Typically, a Living Trust includes provisions that allow the Grantor, who often serves as the initial Trustee, to manage the assets of the Trust until such time as the Grantor:

• becomes "disabled" (unable to manage his or her financial affairs) or
  
• simply prefers to have someone else (perhaps a bank's trust department) manage his or her affairs.

Payments
During the Grantor's lifetime, payments of the net income of the Trust are made to the Grantor at fixed intervals. The amount of the payments can be changed from time to time at the request of the Grantor.

When the Grantor dies, the Trust provisions designate the beneficiaries who will receive the Grantor's property, much in the same manner as a will. At the option of the Grantor, these provisions include specific distributions of cash or named property, and distributions of all of the remaining trust assets. For a joint living trust, perhaps the first spouse to die will direct that all of that person's assets remain in the trust for the benefit of the survivor. The successor Trustee carries out these provisions in a role similar to that of an Executor. These provisions also allow the Grantor to include a trust share that will be maintained for the benefit of the Grantor's minor children through a trust for minor children.

Advantages of a Living Trust
The Living Trust is often viewed as a preferable alternative to the Will. Some of the perceived advantages of the Living Trust relate to privacy, reduced probate costs, and management of assets.

Funding the Trust. In addition to creating and signing a living trust document, assets must be transferred into the trust. A living trust only owns the assets that are actually transferred into the trust. Any assets that remain titled in the name of the grantor will be subject to potential probate administration at the death of the grantor. (The exceptions include assets which (a) are held jointly with another person with rights of survivorship, for example a home, (b) pass pursuant to "transfer on death" or "pay on death" designations, for example bank accounts, or (c) pass by beneficiary designation, for example retirement plans and life insurance.) Assets should be transferred from the grantor to the trust to achieve the result that the property is then legally owned by the trust. Then, upon the grantor's death, because the trust (as owner) survives the grantor's death, it is not necessary to utilize the probate system to effectuate a transfer of the assets to the grantor's beneficiaries. Instead, the (successor) trustee can distribute the assets in accordance with the trust provisions. Assets can be transferred to the trust both at the time of the creation of the trust and also at later times. Separate transfer documents must be used for this purpose because the trust document itself does not contain any language of conveyance or any list of assets.

Asset Protection from Creditors. At least while the grantor is alive, holding assets in a living trust offers little protection of those assets from the claims of creditors (i.e., for debts incurred by the grantor). In most cases, this lack of protection continues to be true after the death of the grantor.

As long as the grantor is a trustee (and, for a joint living trust, as long as the grantors file a joint return), it is not necessary to file a separate tax return for the trust. All income and deductions of both the grantor and the trust are reported on the grantor's personal income tax return (joint personal return for the grantors of a joint living trust). However, if and when the grantor is no longer a trustee, the trust must obtain its own tax identification number and file a separate income tax return. While the grantor is alive and can therefore still revoke the trust, the tax return is merely a "pass-through" return where the trust allocates the income to the beneficiaries who received the income. This allocation of income is detailed on schedules that are filed with the IRS by both the trust and the individual beneficiaries. When the grantor dies and the trust therefore becomes irrevocable, the beneficiaries are still taxed on the income paid out to them. But if some of the income is retained in the trust, the trust pays the tax on that income.

Especially after the grantor's death, the trust may provide that trust income is to be paid to one beneficiary, perhaps the spouse, while the trust principal is to be maintained intact for the "remainder" beneficiaries, those who will receive the assets that remain in the trust after the death of the income beneficiary. In such cases, it is especially important for the trustee to follow the terms of the trust instrument, or established state law if the trust is silent, in making allocations between income and principal. Income receipts consist of earnings from the investment of the principal, usually including such items as dividends, interest, rents and royalties. Principal receipts consist of such items as the proceeds received from the sale of assets, stock dividends, casualty insurance proceeds, royalties from depletable resources, and principal payments from loans. Income expenses consist of the costs of administering and preserving the trust property. Principal expenses consist of the costs of investing and reinvesting the principal, including defending an action to protect the trust property, making capital improvements to the assets, and taxes on capital gains.

The ownership of property transferred into a living trust by a married person should be clarified, whether it is placed into the grantor's single trust or the couple's joint living trust. For example, if a husband assigns his interest in "all household goods, furniture and furnishings" to the couple's joint living trust, without specifying his ownership intent with respect to a family-heirloom piano, ownership of the piano may be converted inside the trust into equal ownership between the husband and his wife, perhaps against his wishes. To avoid this result, the couple should specify, through the use of a Property Ownership Memorandum attached to the living trust, how each asset is deemed to be owned: as the husband's separate property, the wife's separate property, or jointly.

This Memorandum can be used in both common law states and in community property states. The Memorandum is useful to (a) clarify that no rights in one spouse's separate property are acquired by the other spouse, (b) preserve or establish the community property or jointly-owned nature of certain property, and/or (c) "gift" property interests, for estate tax planning or other reasons, from one spouse to the other by converting separate property to joint property or by converting joint property to separate property, or by transferring separate property from one spouse to the other spouse.

CAUTION: Although there is no longer a federal gift tax assessed on inter-spousal gifts in general, (a) an inter-spousal gift may not qualify for that general exclusion from federal gift taxes if the gift is considered a "terminable interest" � for example if the donee's interest in the property terminates at the death of the donee because the asset passes to a beneficiary of the donor's choosing, and (b) it is possible that there may be state gift tax issues. Consult an attorney for assistance if the use of the Property Ownership Memorandum may result in making such an inter-spousal gift.

Privately-held interests in a partnership can be transferred into the living trust by contacting the managing partner for assistance. The interests can be transferred by having new certificates prepared in the name of the living trust and the old certificates surrendered. However, with many privately-held partnerships, there are restrictions in place to prevent the transfer of interests without the prior consent of the remaining partners. These restrictions, often detailed in the partnership agreement or perhaps in a separate "buy-sell" document, are usually intended to prevent the admission of unknown third parties as partners, NOT to prevent the transfer of the grantor's partnership interest to the grantor's own living trust. But it is important to obtain the necessary consent prior to the transfer in order to ensure the validity of the transfer.

See this program's "Stock Power" and "Trust Letter to Bank or Broker" documents.

If the partnership interest was purchased through a public offering, contact that broker for assistance in transferring the interest into the living trust. The broker may require that it be provided with satisfactory evidence (a) that the trust is in existence, (b) who are the authorized trustees, and (c) what powers the trustee enjoy. This information can be provided by supplying the broker with a copy of the trust document itself. However, if privacy is desired, the broker can be supplied instead with only the selected information about the trust that is needed by the broker. The simplest way to do this is to provide the broker with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. (See this program's "Trust Letter to Bank or Broker" document.)

Privately-held interests in a partnership can be transferred into the living trust by contacting the managing partner for assistance. The interests can be transferred by having new certificates prepared in the name of the living trust and the old certificates surrendered. However, with many privately-held partnerships, there are restrictions in place to prevent the transfer of interests without the prior consent of the remaining partners. These restrictions, often detailed in the partnership agreement or perhaps in a separate "buy-sell" document, are usually intended to prevent the admission of unknown third parties as partners, NOT to prevent the transfer of the grantor's partnership interest to the grantor's own living trust. But it is important to obtain the necessary consent prior to the transfer in order to ensure the validity of the transfer.

Patents, copyrights and trademarks can be transferred to the trust through the use of a bill of transfer. (See this program's "Bill of Transfer" document.)

Patents. An application for a patent with the United States Patent and Trademark Office can be made only in the name of the individual inventor(s). But the assignment to the living trust can be made (a) before the application is filed, (b) after the application is filed but before the "Letters Patent" are issued, or (c) after the Letters Patent have been issued. If the Letters Patent have been applied for or issued, the assignment should include not only the grantor's rights in the invention, but also the grantor's rights in the application, or the Letters Patent, as the case may be.

After an assignment is made of ISSUED patents or Federally REGISTERED trademarks, a formal assignment should be recorded in the United States Patent and Trademark Office, similarly for copyrights in the office of the United States Copyright Office. Contact an attorney for assistance.

The description of the various interests in patents, copyrights and trademarks to be transferred should generally be in the following forms:

Trademark (used, but not Federally registered): ABCD trademark, together with the goodwill of the business in connection with which the mark is used, to the full end of the term(s) for which protection may be granted.

Trademark (if application has been made): ABCD trademark, together with the Application for registration, Serial Number 00/00000, and together with the goodwill of the business in connection with which the mark is used, to the full end of the term(s) for which protection may be granted.

Trademark (Federally registered): ABCD trademark, and United States Registration Number 0,000,000, together with the goodwill of the business in connection with which the trademark is used, to the full end of the term(s) for which protection may be granted.

Invention (patent application not yet filed): Invention of a better rat trap invented by Joe Block.

Patent (pending): Invention of a better mole trap invented by Joe Block, as disclosed in an application filed in the United States Patent and Trademark Office on February 28, 1998, Serial Number 00/000000, to the full end of the term(s) for which protection may be granted.

Patent (issued): United States Letters Patent for a better mousetrap Number 0,000,000, dated February 23, 1996, issued to Joe Block as inventor, together with all claims for damages from, and the right to sue for any past infringement of the Letters Patent, to the full end of the term(s) for which protection may be granted.

Copyright (not registered): An original literary work entitled "My Best Friend", authored and owned by Joe Block, together with all copyright rights to the work, and together with the right to secure registration for the work and all renewals, reissues, and extensions of the copyright, to the full end of the term(s) for which protection may be granted.

Copyright (registered): An original literary work entitled "My Worst Enemy", authored and owned by Joe Block, together with all copyright rights to the work, including the registration for the work issued by the United States Copyright Office on November 10, 1998, Registration Number TX00000, and together with the right to secure renewals, reissues, and extensions of the copyright, to the full end of the term(s) for which protection may be granted.

It is recommended that the Trust Property Schedule be reviewed and updated each year. Perhaps the anniversary of the trust's formation can be selected as a convenient date. The purpose of this review is to identify assets which have inadvertently not been transferred to the trust, to transfer such additional assets as appropriate, and to update the Trust Property Schedule and/or the Property Ownership Memorandum with additions and deletions. By transferring all appropriate assets to the trust, probate administration can be avoided on those assets upon the death of the grantor. Further, an up-to-date Trust Property Schedule will greatly assist the successor trustee when that person assumes the office. Additionally, the review may result in the grantor making amendments to the trust document itself or to the selection of assets to be held by the trust, perhaps as a result of new tax laws, the size of the grantor's estate, or the grantor's intentions regarding beneficiaries. Assets can be added to the trust using the various methods described in this worksheet. Changes to the trust provisions can be made by amending the trust. (See this program's "Living Trust - Amendment" document.)

Contact the secretary of the entity which issued the stock, bonds or other type of security (e.g. limited liability company "units") for assistance in having new certificates prepared in the name of the living trust and the former certificates surrendered.

In order to properly re-title the account, the secretary will need to know the name of the trust. Furthermore, the secretary will usually want to make sure that the trust is in existence, learn the identity of the current trustee(s) and any successor trustee(s), and verify that the trustee(s) has/have the authority under the trust document to open and maintain the brokerage account. In order to provide the secretary with this information, an original copy (or a photocopy) of the entire trust agreement can be supplied. However, if privacy is desired, the secretary can be supplied instead with only the selected information about the trust that is needed by the secretary. The simplest way to do this is to provide the secretary with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. The selected pages should include those which contain the following information:

• Declaration of Trust (first page);
  
• Identity of the trustees (first page, plus other pages which describe alternate and/or successor trustees;
  
• Powers of the trustees; and
  
• Signature page (and notary page, if any).

See this program's "Trust Letter to Bank or Broker" and "Stock Power" document.

If the security is jointly owned by non-spouses, an attorney or tax consultant should be contacted because there may be gift tax implications of the transfer.

Promissory notes (where another person owes the grantor money) can be transferred to the living trust by using a bill of transfer. However, check for a provision in the note that prohibits assignments. (See this program's "Bill of Transfer" document.)

Any associated documents should also be transferred (for example, a real estate mortgage or deed of trust, or a security agreement for equipment, fixtures or inventory). An attorney should be consulted to assist with the transfer of any such security documents because those documents must usually be recorded in the appropriate state or county office.

Ownership of property of a married person that is transferred to either a single or a joint living trust should be clarified. For example, household furnishings may be owned jointly between the spouses by design or by default, before they are transferred to the trust. If the husband simply assigns all of his interest in "all household goods, furniture and furnishings" to his single trust, it is not entirely clear which assets are included. This is especially true if one spouse claims total ownership of a certain asset perhaps received by that spouse as a gift, or brought into the marriage by that spouse. That spouse may expect to retain that asset as separate property for sentimental or financial reasons. For example, perhaps a husband brings into the marriage a grand piano that has been in his family for several generations. By assigning his interest in "all household goods, furniture and furnishings" to the couple's joint living trust, without further specifying his ownership intent with respect to the piano, ownership of the piano may be converted inside the trust into equal ownership between the husband and his wife. If the couple later divorces, or upon the death of the husband or wife, a one-half interest in the piano may be distributed to the wife or her beneficiaries, against the wishes of the husband. To avoid this result, the couple should specify, through the use of a Property Ownership Memorandum, that the piano will remain the sole property of the husband inside the trust.

This Memorandum can be used in both common law states and community property states. In the nine community property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI), property or income acquired by either spouse during the marriage is considered equally owned by both spouses (unless otherwise agreed to by the spouses). Separate property brought into the marriage by one spouse theoretically will remain that spouse's property. However, if separate property is commingled with marital property, or if the couple resides in multiple states, the issues become very complicated. The Memorandum is useful to (a) clarify that no rights in one spouse's separate property are acquired by the other spouse, (b) preserve or establish the community property or jointly-owned nature of certain property (which, incidentally, provides certain tax advantages for appreciated property upon the death of one spouse), and/or (c) "gift" property interests, for estate tax planning or other reasons, from one spouse to the other by converting separate property to joint property, or by converting joint property to separate property, or by transferring separate property from one spouse to the other spouse.

CAUTION: Although there is no longer a federal gift tax assessed on inter-spousal gifts in general, (a) an inter-spousal gift may not qualify for that general exclusion from federal gift taxes if the gift is considered a "terminable interest" -- for example if the donee's interest in the property terminates at the death of the donee because the asset is then set to pass to a beneficiary of the donor's choosing, and (b) it is possible that there may be state gift tax issues. Consult an attorney for assistance if the use of the Property Ownership Memorandum may result in making such an inter-spousal gift.

The Property Ownership Memorandum provides three schedules, one each to list property to be deemed owned separately by each spouse, and one to list property to be deemed owned jointly. Any property not specifically listed on any schedule will be deemed to be owned jointly.

When the trust has been signed and assets transferred to the trust, the trust is then a viable, legal entity and the trustee has full authority, power and control to manage the trust assets. The trustee also has certain responsibilities to preserve and protect the assets.

Insurance. After insured assets have been transferred to a living trust, the insurance agent should be notified of the change. The named insured on the policy should be amended to add the trustee. The change should not affect the coverage or cost of the policy.

Documents. After the title of each asset has been transferred from the grantor to the trustee, there will be various title documents such as deeds, stock certificates, bank certificates, etc., evidencing the fact that these assets are owned by the trust. Each such title document should be kept in a safe place, such as a safe deposit box, and the person named as the successor trustee should be notified as to the location of these documents. If any securities are held in "bearer" form, such as bearer bonds or unregistered securities, it is recommended that a separate safe deposit box be obtained and clearly identified as holding only trust assets. If such items were instead held in the grantor's safe deposit box or at the grantor's home, it could be argued that those assets will be subject to probate administration, that is, not effectively owned by the trust. Additionally, the safe deposit box should be held in the name of the trust so that the successor trustee will have the right to gain entrance to the box.

Contact a broker for assistance in re-titling the securities in the name of the living trust. In order to properly re-title the account, the broker will need to know the name of the trust. Furthermore, the broker will usually want to make sure that the trust is in existence, learn the identity of the current trustee(s) and any successor trustee(s), and verify that the trustee(s) has/have the authority under the trust document to open and maintain the brokerage account. In order to provide the broker with this information, an original copy (or a photocopy) of the entire trust agreement can be supplied. However, if privacy is desired, the broker can be supplied instead with only the selected information about the trust that is needed by the broker. The simplest way to do this is to provide the broker with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. The selected pages should include those which contain the following information:

• Declaration of Trust (first page);
  
• Identity of the trustees (first page, plus other pages which describe alternate and/or successor trustees;
  
• Powers of the trustees; and
  
• Signature page (and notary page, if any).

See this program's "Trust Letter to Bank or Broker" document.

If the account is jointly owned by non-spouses, an attorney or tax consultant should be contacted because there may be gift tax implications of the transfer.

It is recommended that the OWNERSHIP of retirement plan accounts NOT be transferred to a living trust because such a transfer will usually cause immediate tax recognition of the entire account. Instead, perhaps the living trust can be designated as the beneficiary of the plan. But if the grantor is married, it is nearly always recommended that the spouse be designated as the primary beneficiary, and the living trust be designated as the contingent beneficiary (if the spouse fails to survive the grantor, or after the spouse's death). There are two reasons why the spouse should be the primary beneficiary: (1) the spouse generally has the RIGHT to be the primary beneficiary and must otherwise "waive" that right; and (2) if the estate exceeds the federal estate tax applicable exclusion amount ($2,000,000), it is highly advisable that amounts passing to the spouse remain eligible for the federal estate tax "marital deduction". This deduction is always available if the spouse is named as the primary beneficiary. A tax advisor should be consulted, especially if the estate exceeds the applicable exclusion amount.

Contact the plan administrator or account custodian for assistance with the beneficiary designation forms.

Real estate is transferred into a living trust through the use of an instrument called a "deed." When a transfer of ownership into a trust is desired, a deed is prepared, signed in the presence of a notary public, and then recorded by the local government office responsible for recording land transfers (for example, a county recorder). Because the form and content of deeds and the documents required to accompany them and the requirements for recording them, vary widely from county to county and from state to state, it is not feasible for this program to provide you with the document(s) necessary to effectuate a transfer of real estate into the trust. It is recommended that an attorney be contacted for assistance with this transfer.

When there is a loan against the real estate, particular attention must be paid to any loan restrictions regarding a transfer of the real estate. Most loans contain a "due-on-sale" clause, which allows the lender to "accelerate" the loan (i.e., require immediate payment of the entire remaining balance) if the real estate is transferred. The acceleration clause in the loan is designed to help protect the lender when the real estate is transferred (usually by sale) to a third party whose creditworthiness has not been approved by the lender.

Where the personal residence of a borrower is transferred to the borrower's own living trust however, there is no meaningful change in the ownership or use of the property. For this reason, federal law prevents lenders from invoking the "due-on-sale" clause in those instances, provided that the owner continues to occupy the home (as the beneficiary of the trust). Nevertheless, it is still good practice to inform the lender of, and obtain the lender's consent to, the transfer. (See this program's "Trust Letter to Mortgage Lender" document.)

For commercial or investment property on the other hand, there is no such law prohibiting the lender from accelerating the loan when the property is transferred into a trust. In these instances, it is critically important that the grantor of the trust (the owner of the real estate) obtain the advance written consent of the lender, confirming that the "due-on-sale" clause will not be invoked.

Transfer of Residence � Tax Implications. There are important and valuable income tax benefits afforded to the owners of a residence at the time that the residence is sold. For example, for sales of a principal residence after May 6, 1997, a taxpayer may generally exclude up to $250,000 ($500,000 on a joint return) of gain realized on the sale. Holding the grantor's principal residence in a living trust does not interfere with this tax provision. Similarly, home mortgage interest and property tax deductions are available to the grantor to the same extent as if the grantor owned the residence outright.

1. The Bill of Transfer should be signed by both the grantor and the grantor's spouse. Even though the listed property may be owned solely by one grantor, including the signature of the spouse removes any doubt concerning the spouse's interest in the property.

2. It is not necessary that the signatures be witnessed or notarized.

3. If the asset is represented by a document (for example, a bearer bond, a promissory note, or a partnership interest), attach a photocopy of such document to the Bill of Transfer for positive identification. Similarly, if the asset is valuable but perhaps difficult to describe (for example, a piece of jewelry, artwork or an antique), consider attaching a photograph of the object, an appraisal, the purchase document, or an insurance policy pertaining to it.

4. Schedule A should be initialed where indicated, by both spouses. This is done to confirm that the grantors intended to transfer each item that is listed on the Schedule.

5. The Bill of Transfer should be kept in a secure location, preferably in close proximity to the living trust, in order to provide evidence of the asset transfers.

1. The Joint Living Trust Funding Worksheet is not a legal document and does not require any signatures, witnesses or notarization. The Worksheet is merely an organizational and informational document. It should be kept in a convenient place and periodically updated. A copy of the Worksheet should be provided to the successor trustee(s) of the living trust.

2. The Bill of Transfer document, if selected, requires signatures as provided in its own signing instructions.

3. The Trust Property Schedule, if selected, is not a legal document and does not require signatures, witnesses or notarization. The Schedule should be kept with the living trust in order to provide the successor trustee with accurate information regarding the extent of the assets owned by the living trust.

4. The Property Ownership Memorandum, if selected, requires signatures and initials of both spouses. After the Memorandum is properly signed, it should be attached to the living trust as verification of the ownership rights agreed to between the spouses concerning all assets owned by either of them.

Publicly-traded securities held in a brokerage account can be transferred into the living trust by re-titling the account in the name of the trust. Publicly-traded securities held in certificate form can be transferred into the living trust by using a "stock power" document. (See this program's "Stock Power" document.) Consult the broker for assistance with either type of security. The broker will most likely require that you provide satisfactory evidence (a) that the trust is in existence, (b) who are the authorized trustees, and (c) what powers the trustees enjoy. This information can be provided by supplying the broker with a copy of the trust document itself. However, if privacy is desired, the broker can be supplied instead with only the selected information about the trust that is needed by the broker. The simplest way to do this is to provide the broker with photocopies of selected pages attached to a cover letter. The cover letter should specifically state that the enclosed pages are, in fact, copies of the trust's provisions. (See this program's "Trust Letter to Bank or Broker" document.)

Privately-held stocks, bonds and other types of securities (e.g. limited liability company "units") can be transferred into the living trust by having new certificates prepared in the name of the trust and surrendering the prior certificates. Contact the secretary of the issuing corporation for assistance. (See this program's "Stock Power" and "Trust Letter to Bank or Broker" documents.)

When the successor trustee assumes that office, the successor trustee must become familiar with the trust provisions, inventory the assets for proper control and maintenance, and attend to the requirements of accounting for the receipts and disbursements of the trust. If the grantor was the immediately-past trustee, it will be necessary to now obtain a federal tax identification number for the trust and begin filing trust tax returns.

Tangible personal property includes clothing, personal effects, jewelry, household goods, furniture and furnishings, recreational equipment, collections, antiques and vehicles. Vehicles, motorcycles, boats and other recreational equipment usually have a "title" instrument that must be changed into the name of the trust. (Read the Guide Topic "Vehicles and Other Titled Personal Property".)

The other types of tangible personal property are usually not "titled", and instead, they are transferred into the trust through the use of a "bill of transfer" document (included in this program and also linked within this document.) Because tangible personal property, for example household goods and personal effects, change frequently and continuous transfers would be impractical, the initial transfer signed by the grantor should convey any and all tangible personal property "now owned or later acquired."

Collectibles/collections, works of art, and antiques with significant value, even though presumably included in this generic category, should be separately and carefully described in the bill of transfer, either at the time of the initial transfer or as they are later acquired. This clarifies the grantor's intent that the trust is to own these items so that probate can be avoided.

Assets transferred to a living trust carry with them the same tax "basis" (used to compute taxable gain, if any, upon a sale of the asset) as the grantor had in those assets prior to the transfer. Upon the grantor's death, however, a living trust generally acquires a date-of-death value basis in all such assets. This is the same tax benefit applicable at death to assets owned in the name of individuals. Thus, there is no disadvantage to transferring appreciated assets into the living trust.

An example may be useful: Thomas purchased 100 shares of Acme stock in 1981 for $1000, which $1000 then constitutes his cost "basis" on which to compute taxable gain if he should later sell the stock. In 1998 the stock is worth $2500. If Thomas sells the stock in 1998, he must report $1500 in taxable gain. If he dies in 1998 still owning the stock, the basis is "stepped up" to the stock's $2500 date-of-death value, resulting in no taxable gain if his beneficiaries immediately sell it for $2500. Likewise, if Thomas transfers the stock to his living trust at any time before his death in 1998, the basis inside the trust remains at $1000 while Thomas is alive, but enjoys a step-up basis of $2500 at his death.

It is very helpful to the successor trustee if a schedule of all trust assets is prepared and maintained. The successor trustee's job will be much easier if the successor trustee does not have to search for the trust assets after the death or incapacity of the grantor. Usually, no one knows more about the grantor's assets than the grantor. The schedule should be updated on an annual or more frequent basis. The schedule need not be attached to the trust document but can be paper clipped or otherwise kept with the trust document. NOTE: LISTING ASSETS ON THE TRUST PROPERTY SCHEDULE DOES NOT CAUSE THEM TO BE TRANSFERRED TO THE TRUST. ASSETS MUST BE TRANSFERRED TO THE TRUST USING THE VARIOUS METHODS DESCRIBED IN THIS WORKSHEET. THE TRUST PROPERTY SCHEDULE IS MERELY A CONVENIENT LIST OF ASSETS ALREADY TRANSFERRED (OR EXPECTED TO BE TRANSFERRED) TO THE TRUST.

These securities should be reissued in the name of the trust. An application must be made to the Bureau of Public Debt (for U.S. Savings Bonds) or to the Federal Reserve Bank (for U.S. Treasury Bills, Notes or Bonds). For forms and assistance, contact the bank or other agent from whom the security was purchased.

The owner of series EE U.S. Savings Bonds generally has the option to either report the interest income from the bonds each year as it is earned (even though not received) or wait until the bonds are sold or redeemed. Transferring the bonds to the grantor's living trust does not interfere with this tax provision. Transferring EE or HH bonds to the grantor's living trust is also not considered a "taxable event." (A taxable event triggers the reporting of earned or accrued interest on the bonds in the year of the taxable event.) If the grantor is the trustee of the trust, the interest will be reported using the grantor's social security number; otherwise, the trust must supply its own taxpayer identification number in connection with the transfer to the trust, and the trustee must sign the transfer request form.

Untitled tangible personal property is transferred into the living trust through the use of a "bill of transfer" document. Because untitled recreational equipment may change, and continuous transfers would be impractical, the initial transfer should describe all untitled recreational equipment "now owned or later acquired." Items with significant value should be separately and carefully described in the bill of transfer, even though, presumably, they are included in the generic description of "all of the grantor's untitled recreational equipment." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.

Cars, boats, motorcycles, trailers and airplanes have formal title documents that govern ownership. These title documents are issued by various governmental agencies, depending on the asset. For example, for cars, contact the local motor vehicle department for change-of-title forms and assistance.

It is usually recommended that the grantor's personal vehicles NOT be transferred into the living trust because of possible complications with liability insurance covering the vehicle and to avoid re-transfer inconveniences. Instead, consider titling the vehicles with another person, perhaps a spouse, in joint ownership with rights of survivorship. This will still allow the vehicle to avoid probate upon the grantor's death. To establish joint ownership with survivorship, the vehicle title should include the names of both joint owners, either followed by the words "joint tenants with survivorship" or separated by the word "or" (depending on local law).

There are, however, at least two arguments in favor of keeping the title solely in the name of the grantor: (1) adding the name of a second person to the title of a vehicle exposes the grantor ("all owners") to liability claims caused by any other driver of the vehicle, which is especially devastating where liability insurance coverage is insufficient, and (2) some states allow for post-death transfers of vehicles by affidavit anyway, without the need for probate, even if titled solely in one name.

If transfer into the living trust is desired, contact the local motor vehicle department for change-of-title forms and assistance.

Untitled tangible personal property is transferred into the living trust through the use of a "bill of transfer" document. Because works of art may change, and continuous transfers would be impractical, the initial transfer should describe all works of art "now owned or later acquired." Items with significant value should be separately and carefully described in the bill of transfer, even though, presumably, they are included in the generic description of "all of the grantor's works of art." This will clarify the grantor's intent that the trust is to own these items so that probate on their account can be avoided.