What Assets Can Be Transferred Into a Living Trust?
A trust is created when one person (trustee) holds real property and assets in a trust for another person (beneficiary). A living trust is created while you are still alive. You maintain complete control and ownership of the real property and assets contained within the trust until your death, at which time the contents of the trust are passed to the beneficiary. You are free to choose what assets can be transferred into your living trust.
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Avoid Probate
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Generally, after someone dies, the person's estate must go through the probate process. A probate court determines the validity of the will, and the court identifies and valuates the assets. All outstanding debts and taxes must be paid from the estate before distribution of any remaining assets can take place. The assets get distributed according to state law if there is no will. It is not uncommon for the probate process to drag out, with lots of paperwork and court appearances by probate attorneys, for which the lawyer and court fees get paid out of the estate assets. A primary reason for having your assets transferred into a living trust is to avoid the time and fees involved with probate.
Creating the Trust
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Most likely you will be both the grantor and the trustee of the trust. The grantor (you) is the person who sets up the living trust and has full control over the management of the trust and can change it any time. The trustee manages the assets contained in the trust. If you are married, you may choose to be co-trustees with your spouse, but you may prefer to name a friend, one of your children or an institution to manage your trust while you are living. You will need to name a successor trustee to manage your affairs after your death or in the event you become incapacitated. The successor trustee cannot change the trust, but she does hold the right to manage the assets in the trust and distribute them according to your directions.
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Transferring Assets
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With the exception of tax-deferred retirement accounts or life insurance policies, you can transfer any assets you wish to have included in your living trust. Pensions and life insurance policies must be treated differently, and it is best to consult with your estate planner before including them. You can include assets such as your house or other properties you own-investments, jewelry, bank accounts, investments, stocks, bonds, royalties, money market accounts, copyrights and so forth. Bank accounts, real estate and stock portfolios must be changed from your name to the name of your trust.
A Pour-Over Will
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Even with a living trust created, you still need to have a will. Although the living trust is similar to a will, it cannot substitute for a will. Known as a "pour-over" will when you already have a living trust in existence, this will is a companion document to the trust and names those individuals who should receive particular assets upon your death, that have not yet been transferred to the living trust.
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