Establishing a trust to hold assets is a common method of estate planning. You can set up a trust to be either irrevocable or revocable.
In most cases, an irrevocable trust can't easily be changed once it's established, unless the beneficiaries agree to the changes or the court issues an order to that effect. Another person generally acts as the trustee who's in control of the assets placed in an irrevocable trust.
A revocable trust, a more common type of living trust, can be changed and altered by its creator or grantor at any time. You would generally act as the trustee of your living trust, and appoint a successor trustee to handle the distribution and control of your assets upon your death.
Each type has its own rules that determine or even complicate the transfer process. It’s important to learn the difference so you can understand how to transfer property out of a trust or how to transfer trust property to the beneficiary.
How to Transfer Property From Trust to Beneficiary
You no longer own the property as an individual when you transfer it into a trust. You can accomplish it with a deed, just as you would transfer a property that you owned as an individual, if you want to sell or transfer property that you've transferred to your living trust.
You'll need the following to get started:
- Copy of original trust
- Copy of original property deed
Using a Trust Transfer Deed
First, start by reviewing the original trust document to ensure that you have the authority to transfer property. You generally act as the trustee of a revocable living trust and you gave yourself this power upon the creation of the trust. Check the property's original deed to verify that it's held by the trust, and not you as an individual.
Then contact your attorney to prepare a deed to complete the transfer of the property. You can also use a blank trust transfer deed template, which is available at most office supply stores. But an attorney should know the proper verbiage that must appear in the deed to make it valid and enforceable.
Sign the deed as the trustee of the trust in the presence of a notary public. You'd sign "Fred Smith, Trustee of the Fred Smith Family Trust" and date it if the trust is named the "Fred Smith Family Trust." Anyone else named as trustee must sign the deed also.
Take the deed to the county clerk or register of deeds to have it filed on record when the documents have the correct, notarized signatures.
Retitling a Car
A vehicle won't have to undergo the probate process upon death if the grantor transfers its title to the trust. But this involves retitling the car, first from the grantor's name into the trustee's control and then from the trustee to the beneficiary.
The trustee must ensure the grantor was the legal vehicle owner and that its title was legally transferred to the trust. The trust terms will dictate how the vehicle title is transferred, but no unnamed beneficiary can benefit from it.
The trustee must sign correctly during the transfer process: Jane Doe, trustee of XYZ trust. They must also ensure that the title transfer is recorded in the appropriate state agency, usually the local DMV, in accordance with local rules.
The trustee must also ensure that the beneficiary has or purchases vehicle insurance. Coverage should be transferred from the trust to the beneficiary if the car already had a policy.
Why You Need to Be Cautious
It's vital to record property documents to ensure that the chain of title for the property isn't broken or compromised. Failing to record can cause future issues regarding the sale of the property and title insurance policies.
The mortgage lender might require that a property come out of the trust first if you plan to refinance property held in a trust. You'll have to sign two deeds, one taking the property out of trust and one to put the property back into the trust after recording the refinance loan.
- HG.Org: Difference Between an Irrevocable and a Revocable Trust?
- HG.Org: Explanations of Irrevocable Trusts
- American Bar.Org: Revocable Living Trusts
- Consumer Finance.Gov: MANAGING SOMEONE ELSE’S MONEY: Help for trustees under a revocable living trust
- HG.Org: Deed Mistakes and The Impact on a Chain of Title
- If you plan to refinance property held in a trust, the mortgage lender might require it to come out of the trust first. You'll have to sign two deeds -- one taking the property out of trust and one to put the property back into the trust after recording the refinance loan.