TITLE TO TRUST ASSETS
When the maker of a revocable trust, also known as the Trustor or Settlor (hereinafter “Trustor”) dies the assets become property of the trust. Many people want to know the best way to transfer trust assets at death. Assets that need to be distributed at death often include real property, vehicles,
ASSETS HELD IN TRUST NAMEREAL ESTATE. If real estate is held in trust name the successor trustee should ordinarily prepare and record an affidavit of death of trustee with the county recorder in the county where the property is located. The successor trustee will eventually need to transfer the property, either to sell it or to distribute it to the beneficiaries of the trust. The recorded affidavit of death of trustee places of record the fact that the Trustor is deceased, that the successor trustee is now the trustee and that the successor trustee can sign a deed to transfer title.
FINANCIAL ACCOUNTS. Financial accounts with banks and brokerage houses held in trust name are transferred to the successor trustee by means of a trust certificate meeting specific statutory requirements. Basically, the successor trustee presents the account holder with a trust certificate, a death certificate and suitable identification and is then allowed to collect the cash or securities held in the account.
PERSONAL PROPERTY. If personal property is not of a type where title is registered (e.g., furniture, dishes, tools, etc.), the trustee merely takes possession of it provided this can be done without a breach of the peace. If however such property is in the hands of others who refuse to deliver it, court proceedings to obtain possession may be required
ASSETS NOT HELD IN TRUST NAMEIdeally, the Trustor(s) or their attorney will have placed all of their assets in the name of the trust. However, it is rare in practice to see a living trust where all of the assets have been put in trust name. Also, when the Trustor dies even assets that are in trust name need to be re-titled in the name of the successor trustee so that he or she can sell or distribute them. The type of action required with respect to titles will depend, generally, on what kind of asset is involved and how title to it was held prior to the Trustor's death. While a complete discussion of title problems is beyond the scope of this article, some common situations are:
REAL ESTATE. Where real estate is not held in trust name, the action required to place title in the name of the successor trustee depends on how title was held by the decedent. For example, if the title lists a predeceased spouse as a joint tenant where one joint tenant spouse died five years earlier and the surviving joint tenant spouse is the current decedent an affidavit of death of joint tenant needs to be filed to remove the predeceased joint tenant spouse's name from the title. Thereafter, a probate court order or other court order will usually be needed to transfer title from the survivor to the named successor trustee under the "pour-over will."
A probate or other court order will also be needed to transfer title to real property held in the name of the decedent alone, or as tenants in common with others.
It may sometimes be possible to transfer title to real property by a court proceeding known as a "Heggstad" petition after Estate of Heggstad, (1993) 16 Cal.App.4th 943.
NON-REAL PROPERTY ASSET. If a financial account, automobile, insurance policy or other non-real property asset is not held in trust name it may be possible to transfer title by means of a declaration meeting certain statutory requirements.
The declaration procedure can only be used if the total value of the account and all other assets subject to probate is less than $150,000. If the total assets subject to probate are worth more than that sum, probate proceedings must be filed to transfer these assets. However, autos, mobile homes, vessels and certain employment-related death benefits are ignored for purposes of this test.
The declaration must state that (1) more than 40 days have passed since the death of the decedent, (2) no probate proceedings are pending or will be filed, and (3) that the successor trustee is the person entitled to collect the account. Provided that the declaration is in proper form and signed under penalty of perjury, the successor trustee can collect the account without court proceedings.
ASSETS THAT PASS TO DESIGNATED BENEFICIARIESSome types of assets pass not according to who holds title but according to who was designated as a beneficiary of the asset by the decedent. The most common examples are bank and individual retirement accounts and insurance policies that are payable to a designated beneficiary upon the death of the account holder (bank and individual retirement accounts with named beneficiaries are commonly referred to as "pay-on-death" or "POD" accounts and "transfer-on-death" or TOD accounts).
BANK ACCOUNTS: The trustee cannot collect the account in POD form since the named beneficiaries, not the trustee, are named as account beneficiaries. California courts regularly recognize the validity of POD and TOD accounts and allow them to avoid going through probate or trust administration. In California, you can convert almost any bank account into POD form by filing forms with the appropriate entity designating a beneficiary or beneficiaries to receive the funds when you die.
INDIVIDUAL RETIREMENT ACCOUNTS. Title to individual retirement accounts ("IRAs"), or other tax deferred investments, is never in trust name, since by law retirement accounts cannot be assigned. Whether the trustee is entitled to collect the account depends on how beneficiaries were designated by the decedent, i.e. transfer on death (TOD). Most married IRA holders designate the surviving spouse as the first beneficiary of the account because the survivor is entitled to "roll over" the account, i.e., combine it with the survivor's own account, without paying immediate income taxes on the account proceeds.
Thus if the decedent had a surviving spouse, IRAs are generally not a problem since the survivor collects the account, albeit in his or her individual capacity and not as trustee. Typically, where there is no surviving spouse, the account will be payable to the named beneficiaries, if any or, if none, to the estate of the account owner. In the first case the trustee cannot collect the account since the named beneficiaries, not the trustee, are named as account beneficiaries. In the second case, the trustee will normally have to file probate proceedings to collect the account unless the estate meets the under $150,000 test, in which case the trustee can collect it by the declaration procedure outlined above.
INSURANCE POLICIES. While life insurance proceeds usually avoid probate, there are some rare exceptions: If no beneficiaries are named or if none of the named beneficiaries are alive, then the life insurance will go into probate so that the court can determine the rightful recipient.
If there are no named beneficiaries, depending on the applicable facts, the trustee may be able to collect the policy via the declaration procedure outlined above, provided that the under $150,000 test is met. If it is not, a probate order will generally be required. Many insureds fail to name beneficiaries for their insurance policies. And if one names no beneficiary, or the named beneficiary dies and there is no "contingent beneficiary" named, the insurance company pays the estate. You cannot use your will to change who will get the proceeds from your insurance policy.