If you create a living trust, you need to "fund" the trust. That means you have to put things "into" the trust. This doesn't occur by magic. You can't just create a trust and go about your life without taking the time to put your assets into the trust. You do so by actually changing title to the assets. You need to go to the bank and change title to your accounts. The accounts will no longer be in your name, but in the name of the trust instead. That requires time and paperwork. The same holds true for any real estate you have. You have to sign a deed which puts the real estate in the name of your trust.
For example, let's say you hold title as "Mary Smith and John Smith, husband and wife as joint tentants." In fact, that is how most married couples hold title to their real estate. When funding your trust, you should sign a new deed (most lawyers will help you with this) which places the house in the trust. Therefore, your new deed would say something like, "Mary Smith and John Smith, husband and wife and joint tenants, hereby grant to Mary Smith and John Smith, trustees of the Smith Family Trust, dated March 30, 2013 the following real estate..." Then you have to file the deed with the county recorder's office. Now, the house (or whatever real estate) is "in the trust."
When you transfer a parcel of real estate into a trust, you are actually "transferring" the asset. The transfer will trigger a reassessment of your property taxes if you're not careful. Therefore, you need to file a Preliminary Change of Ownership Report (PCOR) with the county tax assessor's office. The PCOR let's the assessor's office know about the transfer and prevents the real estate from being reassessed provided the transfer falls under one of several allowable exclusions. The most popular "exceptions" are transfers between a husband and wife and transfers to a living trust. Therefore, you can't just file the deed with the county, but you also need to find out if filing a PCOR would be prudent. In most cases, you need to file one.
If you need help creating an estate plan for your family, contact Robert Mansour's office at (661) 414-7100. Robert serves Santa Clarita, Valencia, Saugus, Canyon Country, Newhall, Castaic, Stevenson Ranch and surrounding areas.
Just because you may have a living trust doesn't mean anything if your assets are not titled in the name of the trust. Not properly funding a trust is one of the biggest reasons trusts fail. Examine title to all your assets. Make sure they are properly titled. Remember that title to an asset trumps any will or trust you might have.
Therefore, make sure your real estate is titled in the name of your living trust. Your bank accounts and other investment accounts should be in the name of your trust as well. In some cases, assets pass by way of beneficiary. Make sure to review those beneficiaries every few years. At times, naming your living trust as the beneficiary of those assets makes sense. However, you should discuss those designations with your CPA and your lawyer. You don't want any unexpected surprises. If you have the appropriate beneficiaries, make sure you've designated contingent or secondary beneficiaries.
Again, a living trust is great, but if nothing is titled in the name of the trust, then all you have is an expensive document.
Adding Your Child to Title, Real Estate or otherwise, May Not Be the Best Idea.
Some of my older clients think that putting their child on title to their home is a good idea. After all, they want their child to get the house after they die. However, putting kids on title may have unintended tax consequences upon the sale of the home. For example, if the child wants to sell the home, the child will have to pay capital gains taxes on the home. That is figured by using the "cost basis" to the home and the amount the house was sold. For example, if Mom and Dad bought the house for $100,000 and it sells for $800,000, the children will need to pay taxes on the gain of $700,000. However, if the home was inherited by the children, and sold soon afterwards, there might be no taxes at all!
Also, anytime you add a person to your assets, you have essentially added a "bull's-eye" to that asset. Why subject your asset to the problems of others?