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How to properly execute and administer living trusts

Living trusts allow a family to customize their estate planning based on their individual needs. They are also cost-effective in avoiding taxes and the probate process, which can be very expensive.

The death of a loved one kicks off a complex legal and business process, and relatives are often left to deal with the affairs of the departed’s estate. Living trusts and wills are therefore best set up and funded while the departed is still around in order to avoid leaving beneficiaries with additional burdens afterward. Trusts need to have assets—bank accounts, investments, stocks, bonds and other assets—retitled to it. The effectiveness of a living trust is dependent upon taking this step.

Bank accounts can be easily transferred, and bank managers can assist in the process. Investment accounts require that a new account be established before transfers may be made from existing accounts. Stocks are a bit more complicated because they require a stock power, including a Medallion guarantee stamp. Savings bonds require that government forms be filled out and also have a Medallion stamp.

Real estate typically is transferred into a trust through a new deed prepared by an attorney. Personal property can be willed into a trust or transferred using an assignment of personal property. Before interests in private stocks can be transferred, any other partners must give their approval, which may require a lawyer’s help. Life insurance policies can easily designate the trust as a beneficiary.

Finally, in Pennsylvania and in most states, retirement accounts, such as IRAs, may require the help of an expert. Because IRAs are tax deferred, a transfer can have serious tax ramifications.

Source:, “Your Mind on Money: Crafting an Estate Plan Is Important,” F. Marc Ruiz, May 16, 2013

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