After creating a living trust for clients, we have an educational meeting to ensure that assets are properly integrated with the trust. We also talk about how their living trust operates for the rest of their lives.
I usually share this analogy: “Think of being trustees of your trust like being CEOs of your own little company.” Trustees buy and sell in the name of the trust, not in their own names. Trustees open new accounts in the name of the trust, not in their own names. (NOTE: a typical revocable living trust is NOT a business. Your tax rate does not increase; you pay taxes as you have previously, and you do not need an EIN.)
After establishing your living trust, make these slight adjustments when organizing your assets:
- Real Estate: we probably helped you retitle your current house into the name of your trust, but what happens if you sell that house? The title company will know that the house is owned by a trust and will likely just ask to see a copy of the trust to confirm that you have the authority to sell property. Then you’ll simply sign “Jane Doe, Trustee of the Doe Living Trust” in the paperwork. The important thing, though, is that you need to buy your next house in the name of the trust. Again, you’ll show your trust to the title company to show authority to buy property in the name of the trust and will sign your name “Jane Doe, Trustee of the Doe Living Trust”. To gain the full benefits of a living trust, real estate needs to be titled in the name of the trust.
- Bank Accounts: you might choose to change banks for a variety of reasons. When opening a new bank account, open it in the name of your trust. Yes, your checking account will be “owned” by your trust, but you can still pay bills, get cash, and receive deposits like before the trust existed. It might seem scary, but you’re not losing control of your money because you’re the trustee in charge of the trust.
- Vehicles: title your new car in the name of the trust. While vehicles are, arguably, the easiest asset to transfer after death, you can save a few steps for your successor trustee if you’ll ask the car dealership to put the title in the name of the trust. The trust will own the car, but you control the trust as Trustee.
As life changes happen, take a few moments to review your assets and coordinate them with your trust. A funded trust is a trust that works!