Transferring Property into a Living Trust
You must transfer property into a living trust to take advantage of the trust’s benefits. The person who transfers property into a trust is called the “grantor.”
In general, you should put your most valuable property in the living trust, including your house, other real estate, business interests, stocks, bonds, and mutual funds, money market accounts, brokerage accounts, royalty contracts, patents, and copyrights, jewelry and antiques, precious metals, works of art and other valuable collections.
Ownership of real estate – If you own real estate jointly with someone else (e.g., by joint tenancy or tenancy by the entirety), you do not need to transfer it into the trust: That would go directly to your co-owner if you die. Depending on your situation, it might be good to put this property in your trust if you do not want your co-owner to receive your share. Also, if you and your co-owner pass away at the same time (e.g., in a car accident), or the surviving owner later forgets to put the property into a trust, you won’t be able to designate who will receive the real estate. If you hold property as a tenant-in-common with someone else (most often a business partner), consider putting your share of the real estate into the trust, which would allow the real estate to be distributed to your trust beneficiaries without going through probate. Read your property deed to confirm your ownership structure.
Selling Property in Your Trust – You can still sell property after you transfer it into a living trust. The first and most common approach is to sell the property directly from the trust. In this case, the trustee of the trust (most likely, you, as trustee) is the seller. A second approach, used mostly when an institution requests it, is to transfer the property out of the trust and back to you. Once you own the property again, you can sell it as you would anything else.
What Property does not go into a Living Trust?
- Property of little value: This property may not need to go through probate or may be subject to a streamlined process.
- Personal checking accounts: These accounts are usually not put into living trusts, since money goes in and out of them so frequently.
- Property you buy or sell frequently: This is important if you do not expect to own the property when you die.
- Cars: Most cars are not very valuable, and insurance companies may be reluctant to insure a car owned by a trust. If you do own a valuable car, talk to your insurance company about obtaining insurance on a trust-owned car.
- IRAs, 401(k)s, etc.: Technically, these accounts can’t be owned by a trust. However, money from these accounts can still avoid probate if you designate a beneficiary in the account documents to receive the funds when you die.
- Life insurance – Life insurance proceeds are distributed according to your policy. The beneficiary named in that policy will receive the money.
- Income or principal from another trust: If you are receiving payments or distributions from another person’s trust, you can’t put the property itself into your living trust. However, you can transfer your right to receive these items to your beneficiaries in your trust.
This is for information only about transferring property to a trust in California and is not the providing of legal or tax services. For questions about your own situation, you should consult with an hire an experienced estate planning attorney.
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