A revocable trust is useful largely because it avoids probate proceedings after the death of a settlor. Assets titled in the name of the settlor usually go through probate, however. To avoid this outcome, revocable trust property is transferred into the name of the trustee. A revocable trust can hold many different types of property – real estate, vehicles, personal property such as office equipment, stocks and bonds, and bank accounts.
Mortgages and Other Encumbrances
Special requirements apply if another party holds a mortgage, pledge, lien or other encumbrance on titled property, because encumbered property isn’t fully yours. Depending on the terms of the encumbrance, you may be required to obtain the written consent of the lender before you can transfer title. Some mortgage agreements, for example, include a “due on sale” clause that allows the lender to accelerate payments upon a transfer of ownership.
To transfer real estate into the trust, you will need to execute a deed granting title to your trustee. This is typically done by signing the deed in the presence of a notary public then recording it with the local Recorder of Deeds, or its functional equivalent in your jurisdiction. Normally, you would transfer title to real estate using a warranty deed, which guarantees your ownership and the property’s freedom from undisclosed encumbrances, so that title insurance will cover the property.
You may transfer an automobile to a revocable trust by transferring title into the name of the trustee. Check with your insurance company, however, to make sure your policy won’t be cancelled if the trust takes over ownership. Special requirements apply to small boats registered with the state government – certain documents, such as a copy of the notarized Bill of Sale, a Trust Information Sheet and a declaration of U.S. citizenship, must be submitted to the U.S. Coast Guard.
To transfer shares or other securities to a revocable trust, you must re-register them in the name of the trustee on the books of the company or government that issued them and have new certificates issued in the trustee’s name. The name on a bank account or Certificate of Deposit also needs to be transferred into the name of the trustee and a new passbook or certificate issued. The transfer of certain business interests, such as an interest in a partnership, may require a notice of assignment and perhaps amendment of state registration documents and the operating agreement. A retirement account, such as an IRA or a 401(k), cannot be owned by a revocable trust, although you can name the trust as your beneficiary.
Certain property, such as household goods, antiques or jewelry, cannot be registered or titled. If you wish to transfer such assets into a revocable trust, list them in the trust document itself. In addition, prepare a transfer document, such as a Bill of Sale, in favor of the trustee, sign it in the presence of a notary public and deliver it into the trustee’s possession.