Training Outline #1 - Funding
Instructions: Review this outline to test your knowledge on Funding
I. Ownership Documents
Rule: Almost all assets have a document (a piece of paper) that indicates who is the owner.
Here is a common list.
Asset Document that shows owner House Deed
Car Vehicle Registration
Bank Account Deposit Agreement
Video #1. Here is a video explanation of Ownership Documents
Video #2. Here’s an explanation of why we plan
II. Understanding a Trust
A. Explanation . A trust is an agreement between a person giving the property (the grantor) and the person receiving the property (the trustee) where the agreement sets forth instructions on who to spend the money on (recipients called the beneficiary).
B. Naming Convention . With a trust, the owner is the trustee, but the trustee must follow the terms of the trust agreement. Thus, the convention is to name the trustee first, indicate he owns it as trustee, and then identify the trust agreement by its name and date. Looks like this:
[Trustee Name] as trustee of the [Trust Name] dated __________
Video #3. Here is a video explanation
Here are the three parties to a trust. You should be able to name and describe each.
A. Grantor: This is the person who owns an asset and is placing it in trust.
B. Trustee: This person or corporation that manages the money and follow the instructions set forth in the trust.
C. Beneficiary: This is the person(s) that benefit from the trust.
Be advised, a trust only controls assets that are within the scope of an agreement. Thus, if there is a bank account and the grantor becomes incapacitated, the trustee has no authority. The only way to handle the account of a disabled person is as follows:
● Power of Attorney for Property - being named agent
● Guardianship court - being named guardian of the estate
III. Common Classes of Assets
Now that you understand trusts, let’s go over how we can transfer assets into a trust. Here are the steps:
#1: Identify current ownership . Depending on the asset, you will need to identify the asset ownership. In the firm we start with an Asset Summary. However, you will want supporting documentation such as a bank statement, deed, etc. Be advised, clients make mistakes all the time so don’t trust their verbal representation as to ownership.
#2: Transferring to a trust now or at death . There are two ways to transfer an asset into a trust. The first is changing the Ownership Document. By way of example, making a new deed from the Grantor to the Grantor’s trust and registering the deed. The second way is using a beneficiary designations. Beneficiary designations have the benefit of not requiring an ownership change. This can be beneficial when changing ownership will be an administrative burden on a client or a highly regulated business. For example, an account that has direct deposit from social security would require going to the social security office to change. Instead of requiring that trip, we simply use automatic deposit.
Here is a break down of the types of common asset classes and how we typically fund them.
“Change” means change ownership to trust and “Bene” means keep current ownership but change the owner. The attorney on the file will need to identify the beneficiary.
Asset Type Ownership Doc Fund Trust A. Bank / Broker Accts Deposit Agreement Change or Bene B. Real Estate Deed Change or TODI
C. Retirement Accounts Trust Bene D. Annuity Contracts Contract Bene E. Legal Entities Stock / Agreement Change or Bene F. Individual stocks and bonds Certificate Change or Bene G. U.S. Bonds Certificate Change or Bene H. Automobile Title Registration Change or Bene I. Boats Title Registration Change or Bene
Note, if you use a beneficiary designation, be sure the asset is covered by the Power of Attorney for Property because if the client becomes mentally disabled, we will need a method of giving the fiduciary control of that asset.