A dear family member passed away last week, and some of the activity required to deal with the affairs of the estate has fallen to my Mom.
Observing my Mom deal with these issues during a time of already heightened stress reminded me of how important it is for just about everyone to craft and execute a well-thought out estate plan.
In this term “craft and execute,” it is important to stress the importance of following through on the execution step of a comprehensive estate plan, especially if the plan involves a living trust. This step is often called funding.
A living trust can be a very effective estate and financial planning tool; these documents allow a family to do customized financial planning based upon individual family member needs, and in many cases a trust also can help a family avoid the expensive probate process.
Once created, however, if a trust is not funded it will be far less effective in achieving the family’s objectives. To fund a trust, family assets must be retitled to reflect trust ownership.
Bank accounts can be retitled with new signature cards, a trustee certification and copies of the title page and signature pages of the trust document. Most of the time the bank manager will assist with this process.
Investment accounts involve a similar process, although most firms require new accounts to be established in the name of the trust. Existing individual or joint account assets are then transferred to the new trust account.
Stocks held in certificate form require a stock power, which must include a Medallion guarantee stamp. These special stamps are typically maintained by investment firm principals and sometimes bank managers. Stocks held in company DRIP plans involve a similar process.
Savings bonds can be retitled using a specific form found at www.savingsbond.gov. The form also requires a Medallion guarantee stamp and the process takes about eight weeks.
Real estate is typically transferred into a trust by having an attorney prepare a new deed, and personal property such as jewelry or firearms can be willed to the trust, or better yet be transferred before death using an Assignment of Personal Property document.
Interests in closely held private company stock or partnerships can often times be re-deeded to the trust as well if it is allowed in the entities operating agreement. You might want to get the help of an attorney with these issues.
When it comes to life insurance the most common funding method is to designate the trust as the beneficiary of the policy using a change of beneficiary form.
Finally, many families in Northwest Indiana hold a large portion of their liquid assets in retirement account such as IRAs. There can be serious tax ramifications to funding decisions involving these accounts (and annuities); it is smart to get some qualified advice before making changes in this regard.