Estate Planning

 

FUNDING THE TRUST (TRANSFERRING ASSETS INTO THE TRUST)

I.  These assets should be “normally” transferred into your trust:

1.  real estate that you plan on keeping (a recorded deed makes the transfer)

2.  personal possessions are transferred by a 1-page form included with your trust – you don’t have to specifically list all your personal possessions – this form doesn’t transfer assets that you have a vehicle title for (car, boat, mobile home,...)

3.  savings accounts

4.  certificates of deposit (which aren’t IRAs)

5.  money market accounts

6.  investment accounts (that aren’t IRAs)

7.  stocks

8.  bonds (unless you have just a few savings bonds)

 

II.  These assets “normally” aren’t transferred into your trust:

1.  checking accounts (you may transfer them into your trust if you desire)

2.  vehicles

3.  life insurance policies

4.  real estate that you now have up for sale or will put up for sale soon

5.  assets that you plan to totally sell soon or totally cash in soon

6.  annuities

7.  burial plots

 

III.  These assets cannot be “owned” by your trust (they must be owned

by you as an individual):  IRAs, 401k plans, 403b plans, Keogh plans, pensions

These assets can be made payable to your trust (by signing a beneficiary form and listing the trust as the primary or contingent beneficiary).  You don’t have to name your trust as a beneficiary (it is a choice for you to consider).  Normally it is best to name your spouse as the sole primary beneficiary – unless your spouse is in a nursing home, or will have to enter a nursing home

if you die first, or you have children from a prior marriage that you want to list as beneficiaries before your spouse or in some percentages with your wife getting a specific percentage and the children getting a specific percentage:

IRAs, 401k plans, 403b plans, life insurance proceeds, annuities

If you have a revocable living trust, you want to make sure that you have less than $100,000 (one hundred thousand dollars) worth of assets outside the trust (the $100,000 figure doesn’t count these types of assets: (a) assets passing by a beneficiary form – such as an IRA, life insurance proceeds, annuity -- or (b) assets jointly owned with someone else – such as a spouse or children on as joint owners of a checking account.  {Joint tenancy accounts aren’t for everyone.  Don’t put anyone on a joint account with you if they aren’t financially stable.  If you have four children, and you put one child on as a joint owner of an account, will that child try to claim that you only want him/her to inherit the money in that account?}  If you have more than $100,000 worth of assets outside your trust that are not covered by either “a” or “b” above, then there will be probate of your assets (under present Illinois law if you are a resident of Illinois at the time of your death). 

While you are alive, your social security number is used as the tax number for the trust.  In the case of a couple, if you have a joint trust, then one of your social security numbers is used (and if that spouse dies first, then the surviving spouse’s social security number should be used as the trust’s tax number). 

After your death, if the trust continues, then an EIN (employer identification number), meaning a federal tax number, should be acquired from the IRS (by filling out IRS form SS-4 and contacting the IRS by phone or fax); an attorney or accountant can help you get the EIN.

          **  If you have questions about transferring assets to your trust (funding your trust), please consult your attorney or your financial planner. 

**  Any assets passing by a beneficiary form (such as life insurance, IRA, annuity) to one or more persons who are alive and willing to accept those assets, will not pass by the provisions of your will or trust. 

**  If a person dies as a resident of Illinois, and at the time of death has more than one hundred thousand dollars ($100,000) of personal assets in his/her individual name (not counting real estate) that don’t transfer by beneficiary forms, then those assets cause a probate estate to be opened.

Here is an example to show when a probate estate would normally have to be opened in Illinois (and when opening a probate estate would not be necessary):

Example:  Tom has a trust.  There is no probate required in Tom’s situation. Tom’s assets are as follows:

Assets owned by                              Assets in Tom’s individual                      

Tom’s Revocable Trust                  name passing by beneficiary form          

{these avoid probate}                       {these avoid probate}

 

Home                                                  IRA (worth $50,000)           

Certificate of Deposit                   ife insurance policy (worth $100,000)

Savings account                                 Annuity (worth $75,000)

 

Assets jointly-owned                      Assets in Tom’s individual name

Tom’s children                                not passing by beneficiary form

{these avoid probate}                       (if these assets total over

 $100,000 then a probate estate would need to be opened)

 

5 savings bonds                                  car (worth $8,000)   

checking account #1                         truck (worth $10,000)

                                                     checking account # 2 (worth $2,000)

 

Do Tom’s individually-owned assets (ones not passing by a beneficiary form) total over $100,000?  No, they don’t (they total $20,000).  Thus the vehicles can be transferred (or sold) without having to go through the probate process.  The money in the checking account just in Tom’s name can be accessed (the account can be closed out) by the use of a small estate affidavit.