Assignment of Property to Revocable Trust: Key Steps, Costs, and Taxes

Setting up a revocable trust is one of the effective ways of approaching estate planning. This allows the grantor to manage their property and distribute it as they see fit. The main part, however, is the assignment of property to a revocable trust. The report discusses the assignment of property to a revocable trust, including tangible personal property, the steps involved, potential costs, and the tax implications of transferring property into the trust.

Assignment of Property to a Revocable Trust

Transferring Property into a Revocable Trust

To set property in a revocable trust, the grantor has to retitle ownership of assets from the individual to that trust. The grantor remains in control of those assets as the trustee but held in trust for those named as beneficiaries. After the grantor's death, the property held in the trust bypasses probate and goes directly to the named beneficiaries without most of the time and costs associated with the probate process.

Types of assets to be commonly transferred into a revocable trust include the following:

• Real estate
• Bank accounts
• Investment accounts
• Business interests
• Personal property includes items like jewelry, vehicles, and artwork.

Transferring Tangible Personal Property to a Revocable Trust

Assignment of Tangible Personal Property to a Revocable Trust

The assignment of tangible personal property into a revocable trust is fairly straightforward. Generally speaking, tangible personal property is any item that can be physically possessed. Examples include but are not limited to furniture, consumer electronics, jewelry, and vehicles. To transfer these items, the grantor must:

1. Listing: List the personal property you would want to place into the trust. Some individuals make a "Schedule A" listing the things they would want included in the trust.
2. Assignment of Property Document: This is a document that transfers the legal title of tangible property to the trust. It should be detailed with respect to property description and a statement that the ownership is transferred to the trust.
3. Signature and Notarization: Assignment of tangible personal property should be executed and, when the local law so requires, notarized.
4. Retain Possession or Transfer Title: In most cases, physical possession of the subject items is retained by the grantor. However, in the case of items related to vehicles, it may be necessary to formally transfer the title.

How Do I Transfer Property Into a Revocable Trust?

To answer the question, How do I transfer property into a revocable trust?, the process typically involves the following steps:

1. Creation and Funding of the Trust: After a trust has been created, you must "fund" it by transferring assets into the name of the trust.
2. Real Estate: In order to do this in relation to real estate, you will need to sign a new deed which transfers ownership of the property to the trust. The new deed is signed and notarized, and recorded with the local county recorder's office.
3. Bank accounts and investment accounts: You need to call your bank/investment house to transfer ownership of such accounts from yourself to the name of the trust. Vehicles: In some states, you may need to physically go to the DMV to change the title of your vehicle over to the trust.
4. Business Interests: For business interests, such as shares or partnership interests, you will want to either create assignment documents or alter the ownership records to reflect the trust as owner.
5. Tangible Personal Property: As discussed above, you are able to list personal property on a document and transfer ownership of it into the trust without needing to utilize a formal title change.

Cost of Transferring Property Into a Trust

Expenses Involved in Transferring Property to a Trust

The cost of transferring property into a trust can vary depending on several factors:

1. Legal Fees: Hiring an attorney to assist in creating the trust and then transferring the property into that trust can cost anywhere from a few hundred dollars into the low thousands of dollars, depending on the complexity of the trust and how many different assets are being transferred.
2. Filing Fees: Recording a new deed or updating the title on real estate or vehicles can come with filing fees. These vary by jurisdiction but are usually nominal.
3. Financial institution charges: some banks/investment firms may charge nominal fees to update account ownership to reflect the trust.
4. Ongoing Administration: Conspicuously absent as constituting a part of the original transfer, ongoing trust maintenance and ensuring the assets are appropriately titled in the trust could include periodic legal or administrative fees.

Tax Implications of Transferring Property Into a Trust

In most cases, the tax implications of transferring property into a trust are minimal, especially for revocable trusts. Some key points include:

1. No Immediate Tax Impact: Since a revocable trust is essentially an extension of the grantor, there are typically no immediate income or capital gains tax consequences when transferring property into the trust.
2. Property Taxes: Transferring real estate into a revocable trust generally does not trigger reassessment for property tax purposes, as the grantor retains control over the property.
3. Gift Tax: Because the transfer to a revocable trust is not considered a completed gift (since the grantor retains control), it typically does not trigger gift tax.
4. Estate Tax: Assets in a revocable trust are still considered part of the grantor’s estate for estate tax purposes. Upon the grantor’s death, these assets may be subject to estate tax if the estate exceeds federal or state exemption limits.

Conclusion

Transferring property into a revocable trust is a very important step in estate planning to ensure assets are disposed of according to one's wishes. The assignment of property to a revocable trust, including tangible personal property, is relatively simple and advantageous, especially for avoiding probate. One Pacific Trust can assist in making this process seamless and straightforward. Generally, the assignment of property to a revocable trust comes at a modest cost, but it's crucial to consider any tax implications and ensure everything is handled correctly with the expertise of One Pacific Trust.