Common
Questions
(1) Completing a Living Trust & Pricing
(2) Titling Assets in Your Trust
(3) Changes In Marital Status
(4) Amendments, Reviews, & Changes
(5) Why & When To Review & Update
A Trust
(6) Why You May No Longer Need
or Want An AB or ABC Trust
(7) Important Issues When Someone
Dies or is Dying
(8) Real Estate Issues
(9) Medical Directives
(10) Granting / Obtaining Signature
Power
(11) Trust Copies & Originals
(12) Incapacity Issues
(13) Confidentiality Issues & Policies
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Titling
Assets In Your Trust : Filling Out Forms When Titling Your Assets in the Name of
the Trust
- Proof Pages
To assist you in titling bank, brokerage, savings and other assets
into the name of your trust we provide you with copies of what
we call the “proof pages” of your trust. “Proof pages” are simply
a copy of the first and last page (Declaration page & Signature
page) of your trust stapled together. The proper wording for
titling assets in the name of your trust is set forth in large
bold underlined letters on the first page of your trust. For
your convenience we provide you with five sets of proof pages.
As you go to each institution to title your assets/accounts in
the name of your trust it is a good idea to start by handing
them a set of “proof pages”. Sometimes this is all they will
need. Other times they may need you to fill out a form (which
is discussed below).
- Filling Out Bank / Brokerage Forms
Many banks, brokerages and other institutions require you to complete
a form when titling an account in the name of your trust. It
will be helpful if you remember one rule of thumb when filling
out any form: the answer to any question is usually your name
(or the name of you and your spouse if married). That is because
while you are alive you are everything and everybody to your
trust! The form may ask you to fill in the name of the “Settlor”,
the ‘Trustor”, the “Beneficiaries”, the “Grantors” or the “Trustees”
etc. In each and every case the answer to the question is your
name (s). The rest of the needed information is on the first
page of your trust (trust name, trust date, Social Security Number
which functions as the trust EIN or tax ID number while you are
alive, etc.)
- Trustee Powers
You may also encounter questions as to whether you have certain
powers (or does the trust grant you the power to do this or that).
Your trust grants you broad powers to act with your assets and
money as you always have. Remember, this is your trust and your
property -- you can do anything you want! Just check yes to any
action or power you wish to take or have (if not already authorized
checking yes can be considered your statement and modification
to your trust that such is allowed).
- Institutions Should Not Ask for a Copy of Your Trust
Any institution (bank, broker, etc.) that demands a copy of your
trust is out of line. Legally, they simply do not need it. First,
it is none of their business. Second, it actually increases their
liability exposure to have a copy of your trust. Instead, ask
to fill out the above discussed “trustee certification” form
(which almost all institutions have but often fail to mention).
In fact, having you fill out a trustee certification form is
the standard practice of at many institutions. In filling out
the form simply follow the guidelines discussed above.
- Safekeeping Your Trust & Safety Deposit Boxes: Every trust
client leaves our office with a package consisting of a three ring
binder and a plastic envelope. The plastic envelope contains all
of your trust originals – that is, the actual trust and related
documents that you signed. It is your responsibility to safeguard
your originals (contained in the plastic envelope). The three ring
binder contains a complete copy of your trust and related documents.
Our suggestion is to put the originals in a safe place (safety
deposit box, safe, etc.) and let the copy contained in your binder
function as your home copy. Remember – if you store your important
papers in a safety deposit box or safe you should alert someone
as to its existence and whereabouts -- as well as provide for access.
(With a safety deposit box that means they must be on the signature
card and have access to a key! Titling the safety-box in the trust
solves the signature problem but they still have to know where
to find a key.)
- Furnishing Copies To Relatives or Others: As to the issue of
whether or not to provide copies of your trust to others, we believe
it is more appropriate to simply inform the relevant people (children,
successor trustees, etc.) where to find your documents and other
important papers if something happens. Otherwise the choice is
yours. We also suggest leaving an outline of your finances, accounts,
and other data you deem relevant with your important papers (so
your successor trustee has a “road map” of what you own and where
to go).
Granting Signature Power on Assets
The general idea behind a living trust is to provide for uninterrupted
proper management of your assets. If you become incapacitated that
means management of the trust assets (paying bills, etc.) for your
benefit during your incapacity. If you die, this means winding
up your affairs and transitioning your assets to your named beneficiaries.
- Signature Power through Trusteeship Is Accompanied by High Fiduciary
Duty
In essence you are granting signature power to your named successor
trustee – a power that is generally triggered only by your death
or incapacity. When someone gains signature power on assets through
being a trustee, that person is automatically bound by law to the
highest fiduciary duty requiring them to properly manage and use
the assets. The trustee therefore owes you and your future beneficiaries
the highest degree of honesty and fair dealing. Thus, the trustee
is accountable to the beneficiaries and would be held liable by
any court for misuse, mismanagement, or misappropriation of any
assets. Therefore, a high degree of legal protection accompanies
granting signature power through trusteeship. That said, if a wrong
acting trustee has fled to Brazil or spent all the money, there
may be a certain difficulty in collecting – which is why you should
still choose your trustees and successor trustees carefully. Point
is, there is always some degree of risk associated with granting
anyone signature power. The idea is to minimize it.
- A Reminder: Management of your trust assets is already addressed
should you become incapacitated.
One of the advantages of a trust is that it provides for management
of your trust assets in the event that you become incapacitated.
That is, with a note from two licensed physicians (stating your
incapacity) your designated successor trustee (owing you the highest
fiduciary duty) will be able to step in, be given signature power,
and manage the trust assets during your incapacity. This avoids
the need for seeking a conservatorship for managing those assets
(a costly, time consuming, bureaucratic process). For many clients,
knowing that their successor trustees will be given signature power
on assets if they become incapacitated eliminates any perceived
need to risk granting present signature status on trust assets
to anyone else.
- Granting Present Signature Power on Some or All Assets
Nonetheless some clients wish to grant another individual (typically
a child) present signature power either on some selected assets
(accounts) or maybe even on all assets. This is often true for
clients who find themselves in a declining state of health or
ability -- and who need the help of others in maintaining their
financial affairs and paying bills. Still other clients just
wish to grant someone the present ability to sign (typically
to a child) just because they want to (as an emergency measure
or what not). The reasons are without end but the end goal is
the same: to elevate someone to sign on assets right here and
now even while you are alive and technically able to do it yourself.
- Potential Dangers of Granting Someone Present Signature Power
Before laying out the means to this end it is important to discuss
the potential dangers of giving someone signature power. Many
people are trustworthy but unfortunately some are not. We have
all heard a story of someone being wiped out or stolen from by
a child (or someone else) they granted signature power to. It
happens all the time. Be very aware of this danger – it could
happen to you. When you grant someone signature power, no matter
how much legal protection you have, you are still handing them
the “keys to the safe”. Fiduciary duty or not, if they misappropriate
the money, it still has to be recovered.
- Signature Power through Present Co-Trusteeship vs. Power of Attorney
Two general (but not exhaustive) methods for granting signature
power to someone will be discussed. One method is through appointing
someone as a present acting co-trustee, the other method is though
granting someone a power of attorney. Appointing someone as co-trustee
is the only proper way to give signature power to someone for
assets titled in the name of your trust. Thus it is important
to remember that a power of attorney will not work to grant signature
power for assets titled in your trust. A power of attorney will
only function on assets outside of the trust (and generally you
don’t want assets to exist outside your trust except qualified
retirement plans). At present your paperwork reflects only you
as the trustee of your trust – and because of that, no institution
is going to properly allow anyone else to sign -- unless you
elevate that person to the status of a present acting trustee.
Repeated: If you have a child or other person on an account as
a present signer they will not be allowed to stay on the account
when you title it in your trust unless you appoint them as a
present acting co-trustee.
- Appointing Someone As a Co-Trustee:
Your choices in giving someone signature power by appointing them
as a present acting co-trustee is to 1) elevate them to the level
of a present acting co-trustee on selected accounts only (appointment
of limited co-trustee) or 2) elevate them to the level of present
acting co-trustee on all accounts and trust assets (appointment
of full co-trustee). Remember, if you presently have a child
who can sign on an account, in order to allow them to stay on
as a signature you will need to appoint them as a present acting
co-trustee (limited or full). For your convenience we supply
several forms which you can utilize towards these ends. Because
the law automatically binds any trustee with the highest fiduciary
duty, granting present signature power though appointment of
co-trustee provides more protection than a power of attorney.
Yet it is important to emphasize that even with appointment of
a co-trustee, you should still be prudent and cautious whom you
grant signature power to – in that you are still handing them
the “keys to the safe.”
- Appointment of Limited Co-Trustee Form:
Appointing someone only on selected accounts is sometimes perceived
as a middle ground approach because you limit the “signature
power risk” to one or a few selected accounts only (vs. granting
power on all trust assets). If you wish to grant someone signature
power on only limited trust assets or selected accounts you may
utilize the form entitled “Appointment of Limited Co-Trustee”
(wherein you detail and list the person and the accounts/assets
that you are authorizing their signature on).
- Appointment of Full Co-Trustee Form
If you wish to grant someone signature power on all trust assets
or accounts utilize the form entitled “Appointment of Full Co-Trustee”
(wherein you detail the person authorized to sign on any trust
asset).
- Signature Power through Power of Attorney
As an alternative, some folks turn to utilizing financial durable
powers of attorney to address potential incapacity and management
of assets on your behalf. A financial durable power of attorney
generally grants someone broad power to act on your behalf as
an individual (file tax returns, buy and sell assets, sign on
accounts and other assets, etc.). The danger with powers of attorney
are that the person you grant the financial durable power of
attorney owes little or no fiduciary duty to you or others. You
are simply granting them the power to act in your stead. If there
is misuse, misrepresentation or misappropriation of the assets
there is little recourse available in that it is just as if you
did the act yourself. It is for this reason that we do not automatically
draw up financial powers of attorney during your trust process.
(We do however provide a form, broad based power of attorney,
if you wish to utilize it – discussed below).
- Why Would You Need a Power of Attorney if You Have A Trust?
Again it is important to emphasize that a power of attorney grants
signature power only on assets that you own as an individual.
A financial durable power of attorney does not and will not grant
the power for someone to sign or act on assets titled in your
trust (or allow them to modify your trust in any way). Given
the fact that your goal is to title most all of your assets in
the name of your trust you might ask if there is any need for
a power of attorney. The first answer to this question can be
found in the fact that there are certain assets that cannot be
titled in your trust – mainly Qualified Retirement Plans such
as IRA’s, 401k’s, PERS, etc. If you have large amounts tied up
in such plans (or other assets you may leave outside the trust)
you may want to consider a contingency plan for getting at those
assets in case you become incapacitated. (We have seen situations
wherein a well spouse is unable to access the incapacitated spouse’s
retirement accounts.) There is also the possibility you may wish
to allow other actions on your behalf such as filing tax returns,
etc.
Fact is, there are an unending variety of powers of attorney
(i.e. “springing” which only become effective on incapacity, “limited”
to specific acts., etc.). Whole books are devoted to the subject.
– which is why hours and hours could be spent on the topic alone.
If you want to properly address this subject you should seek competent
legal advise from a qualified attorney who can help you carefully
tailor a document to your specific needs, objectives, and situation
(we do not counsel on this subject).
For your convenience however, we provide you with two types of
financial power of attorney 1) a broad based power of attorney
and 2) a more limited power of attorney.
- Broad Based Financial Durable Power of Attorney Form
This broad based power of attorney pretty much grants whomever
you appoint the power to sign and act in your stead on anything
and everything – no restrictions (although they cannot modify
your trust or act on trust assets). Some clients are perfectly
comfortable granting such broad powers to certain individuals
(spouses, children, confidants, etc.). Having this completed
form would certainly allow for access to your non-trust assets
(incapacitated or not) and does amount to a strategy for dealing
with such assets as IRA’s, 401k’s etc.. If correctly filled out,
the provided broad based power of attorney form should work at
allowing access by your appointed individuals to these accounts
as well as allowing them to act in your stead on any matter.
A strategy some clients use is to just complete and execute the
form and leave it with their important papers where it can be
found and used if needed (instead of handing it to the person
right now). Give careful consideration before granting anyone
such sweeping powers.
- Limited Power of Attorney Form
If properly completed, this form allows the appointed person to
make a transfer of assets you own as an individual to your living
trust. This should, for example, allow a withdrawal from a Qualified
Retirement Plan account (IRA, PERS, 401k, 403b, etc.) as long
as it is to be put in an account in the living trust. This helps
solve the problem of access to the one major asset (for many)
that can’t be put in the trust. Any money which ends up in the
trust legally binds your trustee to the fiduciary duty to only
use such assets for your benefit.
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