The Veridian Blog

The dual purpose of a basic revocable living trust is to avoid probate and to delay payment of estate tax.  The critical step in accomplishing these goals is known as “funding your trust” through title documents.  For automobiles, as an example, this means changing the pink slip with the DMV.  For real estate assets, this means the Trustors or Settlors (the creators of the trust) simply have to execute a Grant Deed for each property to transfer their houses from themselves "as husband and wife" – to themselves, "as trustees of said living trust". 

Confused?  Think of a trust as a legal fiction… a make believe, intangible entity, like a corporation in business.  By transferring assets to the trust, settlors are essentially relinquishing those assets to this legal entity in name.  Therefore, because they don’t technically own anything at death, these assets will not be required to go through probate – an extremely time-consuming and costly court process.  Practically, during their lifetimes, nothing will change because they are named as the trustees, or “managers” of their own assets.  During their lifetimes then, they retain the power to do as they choose – just as if they owned it outright on paper. 

In addition to the Grant Deed, a Preliminary Change of Ownership form must also be filled out and submitted.  This will help the county assessor identify the transaction as exempt for a reassessment for property tax purposes.

For more information on revocable living trusts, or estate planning in general, please email me separately…