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Trustworthy Information

Over the years our boutique firm has developed countless relationships with living trusts at various stages of estate planning. While serving these clients in the capacity of real estate sales and management we began to notice many common misunderstandings as to how the trust instrument was vested. These situations routinely led families to experience additional stress, probate and legal fees  when they assumed they were very protected by the trust. Here are just a few considerations to keep in mind when you are establishing a living trust.

When we think trust title vesting we tend to gravitate toward the capital asset class of real estate. Rightfully so, since for many people, their home is the single largest investment they will ever make. So we fixate on the process of putting the family home in the name of the trust. That is easy enough, with the recordation of a quitclaim deed one can transfer the title vesting of the house from an individual person to that of a living trust.

And there the process stops, with only the real estate assets vested in the name of the trust. The remainder of the banking and portfolio paper asset classes remain exposed in personal vestiture with the potential for court probate. Considering the whole purpose of setting up the trust in the first place was to avoid probate altogether, this is where most people get confused when they find themselves having to hire a lawyer.

Each state has a small estate probate dollar threshold for personally held investments. In California, if the gross value of the decedent’s accounts and real property does not exceed $150,000, then the estate may not have to procure letters of administration or await the probate of the will.  An affidavit or declaration signed under penalty of perjury at least 40 days after the death can be used to collect the assets for the beneficiaries or heirs of the estate.  Given the cost of living in the Golden State, this threshold is likely to be exceeded rather quickly by a 401K account value alone. For those exceeding the threshold and that did not vest title of the bank and retirement accounts in the name of trust, they will find themselves requiring probate.

To avoid this simply vest the title of ALL asset classes and accounts in the name of the living trust. Each bank and financial institution has their own forms, procedures and legal departments with which to comply to get this accomplished. Typically they will require a copy of the trust, a death certificate if there is one, ID and the chain of evidence depending on trustee capacity. If you feel vestiture of bank accounts is premature for the trust, then at the very least elect  POD, rights of survivorship and/or a joint tenant so that you may still likely avoid the probate process.

Whether your trust requires a EIN (Employer Identification Number) or not depends on timing/ asset maturity, aggregate holdings and management goals. Typically when the living trust is revocable the settlor, trustee and beneficiary are all the same person and a EIN is not necessary. It is common trust law that after the passing of the decedent settlor trustor the the trust become irrevocable. At which point, depending on the holdings, relative liquidity and maturity dates of the trust holdings, it may be beneficial to exact a EIN. This could create additional time whereby enabling some of the trust’s asset classes to obtain their maximum returns, while mitigating tax liabilities. These are very important aspects to consider when dispensating an estate. You should always consult the advice of a licensed and bonded CPA and/ or attorney as to what is the best course is to pursue for your estate specifics.  They will certainly have more info about individual state trust laws and common law rule against perpetuities.

When you do determine the time is right that your living trust create an EIN (Employer Identification Number) it is as easy as contacting the IRS. The following link will direct you to the pertinent webpage where you can easily walk through the process of setting up an EIN:

Apply for an Employer Identification Number (EIN) Online

Please make sure that you have consulted the appropriate professional so that you vest the name of the instrument appropriately.

MORE Real Estate provides the full spectrum of trust account services. We provide monthly beneficiary and aggregate reconciliations as well as funds dispersal in complete compliance with California state trust laws. We are licensed, bonded and insured to this effect.  Many of our clients are incapacitated, residence of skilled nursing facilities  and/ or remotely managed. Contact us today to find out how our team can best assist your families’ unique estate situation.

Hope you found this trustworthy information.

The content provided does not constitute legal/tax advice and is not intended to constitute advertising or solicitation for legal/tax services. Nothing in this Site should be construed by you as a source of legal/tax advice. You should not rely or act upon the contents of this Site without seeking advice from your own attorney/tax specialist. This information is provided for general information purposes only. IRS Circular 230 notice: In order to comply with requirements imposed by the IRS, we must inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog.

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