Intangible property consists of bank accounts, United States Treasury securities, Treasury bills, investment accounts, stocks, bonds, unit trusts, promissory notes, mortgages, and other security interests.
If you have one or more checking accounts, savings accounts, money market accounts, certificates of deposit, or similar types of accounts at a bank or other financial institution, you will want to transfer those accounts to your living trust as soon as possible. The transfer of these accounts can be accomplished in one of two ways.
First, many financial institutions will simply change the ownership of the account rather than open a new account. This is generally the preferred way because you retain the same account number and you don’t have to purchase new checks. Additionally, if you have monies automatically withdrawn from your account on a monthly or periodic basis for payment of recurring bills, none of those arrangements will be disturbed.
Second, some financial institutions will require that you close out your existing accounts and open new accounts in your name as trustee. Most individuals do not like this option because it requires new account numbers, the ordering of new checks (if a checking account), and the changing of arrangements for the automatic withdrawal of funds for bill payments.
Unfortunately, the method of transfer that must be followed will be determined by the bank or financial institution in which you have your accounts. If you wish to maintain your accounts at the same bank or financial institution, you don’t have any choice but to follow their directives. However, if you must open new accounts, then you have the option of opening the new accounts at any bank or financial institution you choose.
Before you retitle a bank account, make sure that there are no adverse consequences from doing so. This applies primarily to time deposits (such as certificates of deposit) where a premature withdrawal may subject your account to certain penalties. However, sometimes existing accounts are not subject to new rules and regulations that are instituted by a bank or financial institution, such as higher fees or lower interest rates. That benefit may be lost if you now terminate the account in order to transfer it to you living trust.
It is always a good idea when transferring accounts at a bank or other financial institution to actually go to the bank and transact your business personally. In that way, you can be sure that the instructions given to the representative of the bank or other financial institution are correct and that the transaction is handled correctly. In our experience, too many people rely on the bank or other financial institution to make the transfer and find out much later that it either wasn't done at all or it wasn't done correctly.
While you probably have a good idea how your bank accounts should be titled at this point, there is no harm in restating it one more time. Again, using our John Doe example, bank accounts should be titled as follows:
"John Doe, Trustee of the John Doe Living Trust,
or his successor in trust, u/d/t, dated December 2, 2008,
including any amendments thereto."
Even though your bank accounts will bear a title similar to this after they are transferred to your living trust, there is no requirement that your checks reflect the name of the trust. Many people don't want the name of their trust on their checks, so they continue to have their checks printed with their name and address - just as they had it before. However, some people get a kick out of writing checks with the name of their living trust on them. The important point to remember is that it's a matter of personal preference - you can do it either way.
One further point with respect to bank accounts held in trust. The Federal Deposit Insurance Corporation provides deposit insurance for accounts in many banks and savings associations. The insurance limitation is now $250,000 in the aggregate for all accounts owned by an individual at a particular bank or savings association, including accounts held in a revocable living trust. However, new regulations provide that an account in the name of a revocable living trust may be separately insured for each qualifying beneficiary who becomes entitled to an interest in the trust upon the grantor's death. A 'qualifying beneficiary' is a spouse, child, grandchild, parent, and sibling of the grantor. To gain this additional insurance coverage, the account must be held in trust. For more information on these new FDIC regulations, click here.
U.S. Savings Bonds
You can transfer United States savings bonds to a revocable living trust. The transfer is made by having the bonds reissued in the name of the trustee. The form that must be used to make the transfer is Department of the Treasury Bureau of Public Debt, Form PD F 1851 E (Request to Reissue United States Savings Bonds to a Personal Trust). Complete instructions for reissuing the bonds are set forth in Form PD F 1851 E.
This form may be used to transfer all savings bonds, including Series EE, Series E, Series HH, Series H, and Series I. Use Form PD F1851 to describe the bonds. If more than 13 bonds are to be transferred, use Form PD F 3500 (Continuation Sheet for Listing Securities).
You should be aware, also, that your signature (as the bond holder) must be certified by a certifying officer, including authorized employees of insured depository institutions and corporate central credit unions. For a complete list of certifying officers, see Department of Treasury Circular No. 300 31CFR Part 306. This is not the same as having your signature acknowledged by a notary public.
Since you will be transferring your savings bonds through the mail to a Savings Bonds Processing Site (there are five sites specified in the instructions), you should send them by registered or certified mail with a return receipt requested. This will give you some satisfaction that the bonds were actually delivered.
U.S. Treasury Bills
United States Treasury bills may be owned by individuals through a TreasuryDirect account. If you have a TreasuryDirect account, it can be retitled in the name of the trustee of your living trust.
The proper form for this purpose is Department of the Treasury Bureau of the Public Debt, Form PD F 5178 E (Transaction Request). Be sure to have your signature certified by a certifying officer.
Accounts maintained at a brokerage firm or with a mutual fund company can be transferred to a revocable living trust. The practices among these firms varies considerably and there is no definitive procedure to accomplish the transfer. In some cases, a new investment account will be opened in the name of the trustee and the existing account closed. In other cases, the existing account will simply be retitled in the name of the trustee.
The best way to effectively transfer an existing investment account at a brokerage firm or a mutual fund company is to call the company and tell them what you want to do. If you have a regular contact, such as a stock broker that you regularly do business with, then calling that stock broker is the best way to accomplish the transfer. Your stock broker will be familiar with company policies and will be able to advise you. In many cases, your stock broker will handle everything for you.
Publicly-Traded Stocks and Bonds
If you hold stock in a publicly-traded company and you are in possession of the stock certificate, there are two ways that you can transfer that stock to the trustee of your living trust:
First, you can contact the company’s transfer agent and have the stock certificate reissued in the name of the trustee. In order to do that, you will have to send the original stock certificates to the company’s transfer agent. It is a good practice to make a photocopy of the front and back of each certificate before sending them. You will also have to find out who the transfer agent is. The starting point is to look at your certificate. A transfer agent will be listed on the certificate. You should then call that transfer agent to see if it is still the transfer agent for the company. If not, someone may be able to tell you who the transfer agent is now. If you still have no success, try calling the company itself or a local stock brokerage firm. Once you locate the transfer agent, you can ask what information is required to complete the transfer.
Generally, the following will be required.
- A letter of instruction from you, which is signature guaranteed.
- A stock power of attorney, which
- The original stock certificate.
- is signature guaranteed.
- IRS Form W-9.
- A copy of the trust instrument (or acceptable alternative).
Second, you can give the certificates to a stock broker and ask him or her to open an account in the name of the trustee. The broker will then have the stock reissued in street name in the brokerage account. The trustee can request that the stock be reissued in the name of the trustee and the trustee can then take custody of the stock certificates if so desired. However, most individuals prefer to leave their stock holdings in street name with the brokerage firm because of the ease of doing business in that manner. Holding the certificates requires safeguarding them in the first place, although new certificates can be obtained if the originals are lost, stolen, or destroyed. Secondly, it involves time and effort to deliver the certificates each time a sale of the stock is made. Moreover, the costs involved are often higher than having the stock in street name. However, different people have different opinions on this issue - so it is best that you try to discover the best route for your own peace of mind.
Municipal and corporate bonds are transferred to the trustee of a revocable living trust in the same manner as corporate stock. Bearer bonds (i.e., unregistered, negotiable bonds that are payable to the bearer of such bonds) have to be delivered physically to the trustee. The trustee should take possession and place them into a safe deposit box or other secure place. Bearer bonds may be registered in the name of the trustee in most cases. If registration is desired, you should contact the issuer or a stock broker to determine the proper procedure for registration.
Notes, Mortgages and other IOUs
Promissory Notes. A promissory note is a written promise by one party (the "maker") to pay a sum of money to another party (the "payee").
A promissory note can be transferred to a revocable living trust by assignment. An assignment is accomplished by the payee signing over the note to the trustee or trustees of the revocable living trust. The assignment should be in writing and a copy of the promissory note should be attached. If the note is not secured by an interest in certain property owned by the maker, then the assignment is generally not recorded. For a specimen "Assignment of Promissory Note," please click here.
Once a promissory note has been assigned to a revocable living trust, the payee should notify the maker and instruct him or her to remit future payments on the note to the trustee rather than the original payee.
Mortgages. A debt evidenced by a promissory note is often secured by an interest in real property owned by the maker. A security interest in real property is generally referred to as a mortgage.
Under most state statutes, a mortgage on real property may be assigned, but the assignment must be in writing, it must contain a sufficient description to identify the mortgage, and it must be executed, attested and acknowledged in the manner prescribed for the execution, attestation and acknowledgment of deeds of land. The assignment should also be recorded on the land records of the applicable governing body in which the real property is located.