What is meant by “trustee ownership”?
Who owns the property in a trust?
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Trustee Ownership & The Revocable Living Trust.
Trustee Ownership & The Revocable Living Trust. What is meant by “trustee ownership”?
The form of property ownership most rapidly expanding in the estate planning field is that trustee ownership. By establishing a revocable living trust, you can control who will receive your property at your death and avoid the probate process.
Doing proper Estate Planning is incredibly important because you are planning for the future of your family and your assets. When you establish a revocable living trust, you will put most of your assets into that Trust. A common misunderstanding is that the Trust owns the property within it. This is not true. The Trustee of the Trust holds legal title to the trust property. The trust beneficiaries hold beneficial title to the trust property. Accordingly, the Trustee has the power to invest, reinvest, buy, sell, and trade the trust property (as defined in the trust agreement). In contrast, the trust beneficiaries have the right, as provided in the Trust, to use the trust property and receive the income or principal of the Trust.
It is both familiar and generally advised that the maker of a revocable living trust be the Trustee and the beneficiary of their Trust (married couples can be joint trustees and beneficiaries of a joint trust). Notwithstanding, the maker alone can control both the managerial and investment decisions as a Trustee while using or otherwise spending the trust assets without limitation as a beneficiary.
Upon the maker’s death, all the trust property will pass to the beneficiaries named by the maker in the Trust upon the terms and conditions that the maker chose. These trust assets are not subject to legal hoops, costs, and delays in the probate process.
But sometimes, Estate Planning can be confusing. One of the most common questions we get asked at our law firm is who owns the property in a Trust? The short answer is you.
Your Living Trust outlines whom you’d like to receive your property after your death and who should manage the distribution of that property. While you’re alive, you place your property into the Trust and handle it yourself as the Trustee – just as you do now.
When you die, the person you’ve chosen as your Successor Trustee will start managing the property according to the strict directions you’ve outlined in the Trust. When you set up a Living Trust, you fund the Trust by transferring your assets from your name to the name of your Trust. Legally your Trust now owns all of your assets, but you manage all of the assets as the Trustee.
This essential step allows you to avoid Probate Court because there is nothing for the courts to control when you die or become incapacitated. The concept is simple, but this is what keeps you and your family out of the courts.
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Do I Lose Control Of The Assets In My Trust?
You keep complete control of all of the assets, and they are just in the name of your Trust. As Trustee of your Trust, you can do anything you could do before – buy and sell assets, change or even cancel your Trust.
That’s why it’s called a Revocable Living Trust. You even file the same tax return. Nothing changes but the name on the titles.
How Do I Transfer Assets Into A Trust?
Typically you will change the titles on real estate, stocks, CDs, bank accounts, investments, insurance, and other assets with titles. Most Living Trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles. Some beneficiary designations (for example, insurance policies) should also be changed to your Trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die (IRA, 401(k), etc. can. Be exceptions.)
Is nominee ownership the same as trustee ownership?
A nominee is any person or organization that takes title to the property on behalf of someone else. Nominees are sometimes used so that the actual owner of the property can hold title to it in another name. For example, some people do not want it known that they own property in Trust. In these circumstances, the trustees will form a partnership to hold title to the property. The partnership is the nominee for the Trust; the Trust owns the property indirectly, but the partnership’s name is on the title of any property.
What occurs to property in a trust if the grantor passes away?
Following the grantor passes away, the Trustee allocates property to trust beneficiaries or continues administering the assets per the trust documentation. When the grantor was also the Trustee, a successor trustee would take over the role. It’s not unusual to create a trust fund or a family trust that remains to exist long after the grantor has passed away to control an extravagant beneficiary’s spending or offer consistent income for a surviving spouse.
When the trust documentation has instructions for beneficiaries to get assets upon the grantor’s passing, they can get them without heading through probate.