What Assets Can Go Into a Revocable Living Trust?
If you've created a Revocable Living Trust to plan for mental disability and avoid probate and you think that your estate plan is done once you've signed the trust agreement, it isn't. Why not? Because after your Revocable Living Trust has been signed, you'll need to "fund" it with your assets. Here's a list of what types of assets can be retitled into the name of your Revocable Living Trust.
It includes checking, savings, money markets, and CDs. Be careful with CDs because your bank may consider the retitling of a CD into a Revocable Living Trust as an early withdrawal of the funds from the CD. If this is the case, then you'll have to wait until the CD matures before retitling it into your trust.
Non-Retirement Investment and Brokerage Accounts
It includes assets held in an investment or brokerage account in your name, in joint names with others, or as a tenant in common. It doesn't include an account held in a qualified plan including a 401(k), 403(b), IRA, or qualified annuities.
With these latter types of accounts, a change of title will result in negative income tax consequences. Instead of a change of title, they require a change of beneficiary.
Stocks and Bonds Held in Certificate Form
The original certificate must be returned to the stock transfer agent in exchange for a new certificate. It requires obtaining a "Medallion Signature Guarantee" on the stock transfer form and mailing the original certificates via registered mail and insuring the shares for 2% of their current fair market value. Instead of going through all of this, consider depositing your certificates into a brokerage account that's titled in the name of your Revocable Living Trust.
Tangible Personal Property
This includes personal effects (jewelry, clothing, books, personal papers, personal computers); household goods (furniture and furnishings, antiques, collectibles, artwork); motor vehicles (cars, trucks, boats, scooters, airplanes); firearms; pets, horses and cattle; tools; and photos and the like. Note that in some states a motor vehicle titled in an individual's name can be transferred without probate.
It includes shares of stock in a closely held corporation, partnership interests (general and limited), and membership interests in limited liability companies. Be sure to check any shareholders' agreements, partnership agreements, or operating agreements for restrictions on transfers and specific procedures that must be followed to retitle your shares or interests into the name of your Revocable Living Trust.
Why would you want to change the owner of your life insurance policy to the Trustee of your Revocable Living Trust? Because if you become mentally incapacitated, then your Disability Trustee will have the legal authority to deal with policy, including borrowing against the cash value of the policy to pay for your care.
But be careful in states that offer creditor protection for the cash value of life insurance because some states only offer protection for a policy owned by an "individual" resident of the state, and since a trust isn't an individual the cash value will become unprotected. If this is true for your state, be sure that your Power of Attorney gives your attorney, in fact, the legal authority to manage your life insurance.
Monies Owed to You
It includes secured and unsecured personal loans that you've made to others, such as a mortgage that you hold on someone else's real estate.
Transfers of real estate into a Revocable Living Trust require the recordation of a new deed in the locality where the real estate is located.