Congratulations on signing your estate planning documents!  Proper estate planning generally consists of a Revocable Trust (aka Trust), a Certificate of Trust Existence and Authority, a Last Will and Testament, a General Durable Power of Attorney for financial matters, medical directives, authorization to access digital assets, and in some cases a Funeral Representative Designation to deal with your remains after your death. Let’s review the basics of a Trust, including the benefits and what assets belong in a Trust.

What are the benefits of a Trust?

One of the main benefits of a Trust is the ability to avoid probate.  Probate is the legal process to have an asset transferred after the owner of the asset dies and the asset is not jointly owned with another person or there is no beneficiary.  If the asset is owned solely by the deceased person a probate will be necessary to obtain authorization and control of the asset.

In order to avoid probate and maximize the benefit of the Trust, you must transfer assets into the Trust.  After an asset is transferred into the Trust, you are no longer the legal owner of the asset, rather, the Trust is the owner of the asset.  You still have use and control of the assets as you are the Trustee of the Trust.

So, what assets should be transferred into my Trust?

Bank accounts, non-retirement brokerage accounts, stocks, bonds (including U.S. savings bonds), certificate of deposit and mutual funds should generally be owned by your Trust.  Closely held business interests and limited liability interests should also be owned by the Trust.

We generally recommend that the Trust be the beneficiary of any life insurance policies.  Upon the death of the policy owner, the proceeds would be paid to the Trust.  The beneficiaries of the Trust would then have access to the life insurance proceeds.

With individual retirement accounts, 401(k) plans, 403(b) plans, and annuities, you should verify the beneficiary designation.  Most often, a spouse is named as the primary beneficiary.  The secondary beneficiary may be children or other individual beneficiaries.  In some situations, if your children are younger, the Trust may be named as the secondary beneficiary.

In most circumstances, a principal residence and a vacation home should be transferred into the Trust by using a lady-bird deed.  A lady-bird deed provides that you own the home for your lifetime.  You have full ownership and control, and you have the ability to refinance and sell the property.  The lady-bird deed is filed with the county register of deeds where the property is located immediately after it is signed.  A Property Transfer Affidavit is also filed with the city or township.  Upon your death, if you still own the real estate, it is owned by the Trust and a probate is avoided.  A certified death certificate would be filed with the register of deeds.  After you record your lady-bird deed it will be necessary to contact your homeowner’s insurance company to inform the insurance company that your Trust should be named as an additional insured on the homeowner’s insurance policy.

Because every situation is unique, decisions on what assets should be transferred into the Trust and owned by the Trust as well as beneficiary designations should be discussed with your estate planning attorney.