In our last post, we examined some of the time- and cost-saving benefits of a living revocable trust. However, if the revocable trust is not funded properly, the trust documentation will be of no more value than blank pieces of paper.
After creating the trust document, the next step is to change titles and beneficiary designations for every asset that you want to put in the revocable trust. The procedures vary depending on the specific asset, but generally the ownership and beneficiaries will be renamed to the trust.
For example, to retitle real estate, an individual should contact the mortgage lender and the local county recorder’s office. Both may require proof of the revocable trust’s existence. A certificate of trust, a shortened version of the trust, can accomplish this purpose. The certificate explains the trustee’s powers and names them, but it keeps other details private and confidential, such as the identities of the beneficiaries or describe the other assets in the revocable trust.
Individuals may be concerned about a “due on sale or transfer” clause in their mortgage. As we discussed in our last post, an individual retains complete control over all assets transferred into a living revocable trust. Consequently, there should be no change in property taxes, no cause for having the property reappraised, and the mortgage should not be disturbed in any way. In addition, a home that is titled in the name of a revocable living trust should not preclude the individual’s ability to utilize the capital gains tax exemption if it is sold.
Source: The Balance, “What Types of Assets Can Go Into a Revocable Living Trust?” Julie Garber, July 12, 2016