The Law Office of Robert L. Firth - August 2020

The Law Office of Robert L. Firth - August 2020

FirthLaw.com 760-770-4066

Helping clients with bankruptcy, estate planning, and tax resolution.

AUGUST 2020

Funding Your Living Trust How to Safely Transfer and Handle Your Living Trust

Most of the people who read this newsletter have created a living trust. If you’re one of these people, you may recall that when we created the trust, I reviewed the responsibilities you have to fully implement it. Nevertheless, I find that from time to time, it’s a good idea to review the trust’s funding instructions so we can ensure it works how you want it to. So, let’s go through the types of property and assets most people own and how to adequately fund your living trust to make it as effective as possible. Money Markets and Bank/Credit Union Accounts Re-title all money market, saving, and checking accounts to the name of your living trust. However, there is no need to change how your checks are printed. Some credit unions require that you use a “transfer on death” designation rather than a re-title. The “certification of trust,” found at the third tab of your living trust documents will show the financial institution exactly how the account should be titled. Note: If the account is an IRA, see below. Life Insurance and Annuity Contracts As a general rule, name your spouse as your primary beneficiary and your living trust as the contingent beneficiary. It’s essential to periodically review the beneficiary designation on your life insurance and annuity contracts, especially in the case of divorce or upon the creation of your living trust. If my word isn’t convincing enough, listen to this story of a customer who didn’t do his due diligence. The client and I had to create an emergency living trust for his father. The trust was signed at the hospital, and the father passed away two weeks later. However, when the son reviewed the paperwork, he found an old life insurance policy with a death benefit of $35,000 that was

only payable to his father’s first wife, whom he’d divorced over 20 years prior. According to the contract, the life insurance company was obliged to pay the beneficiary. The irony was that the former wife was in a nursing home in Wyoming, living on state Medicaid. So, the insurance payout went to the state of Wyoming to pay for the nursing home bills.

IRAs, 401(k)s, and Other Qualified Benefit Plans

As a rule of thumb, name your spouse as the primary beneficiary and the living trust as the contingent beneficiary. Depending on your age and financial situation, though, this may not apply. If you read last month’s newsletter, you may recall that the IRS has changed the distribution rules for qualified retirement plans. If you have a substantial individual retirement account, consult your tax accountant or financial advisor to figure out the best way to designate your beneficiaries to reduce taxes when you die. Stock Brokerage Accounts, Registered Limited Partner Interests, and Other Non- IRA Accounts Re-title the accounts to the name of your living trust. Take one of your certifications of trust to your stockbroker who can help you. These days, I don’t see many stock certificates, but if you have one in your possession, I urge you to get those into a brokerage account. It will make your life easier and eliminate many problems you may have if the certificates are lost, stolen, or burned in a fire. Real Estate As a rule, all real estate should be owned by your living trust, and I have prepared deeds for those properties which you owned when we set up your trust. I strongly urge you to take a trip to the county recorder’s office to get your deeds recorded if you haven’t already.

Also, be aware of this common trap when refinancing a property: The escrow company will take the property out your living trust during refinancing. They do this because Fannie Mae, Freddie Mac, and the Federal Housing Administration prohibit them from accepting a loan on a property that’s in a living trust. Then, they should make a new deed and transfer it back to the trust. Unfortunately, though, I’ve found that they rarely do so. If you’re refinancing any of your real estate, please call my office and I’ll explain what you need to do. As always, if you have any questions about funding your trust, please don’t hesitate to call my office. In the future, we will discuss more about financing your trust. Stay safe, and see you next month.

-Robert L. Firth Helping clients with bankruptcy, estate planning, and tax resolution.

FirthLaw.com | 1

Published by The Newsletter Pro • www.newsletterpro.com

THE LASTING IMPACT OF THE DEEPWATER HORIZON OIL SPILL LEGAL IMPLICATIONS WE CAN STILL SEE TODAY

the U.S. justice system. However, protecting >Page 1 Page 2 Page 3 Page 4

www.firthlaw.com

Made with FlippingBook Proposal Creator