But when I ask what was put in the trust, clients have no idea what I mean.
A trust is a contract between the three parties:
- The grantor, or the person who creates it;
- The trustee, or the person who controls it; and
- The beneficiary, or the person who receives it.
It is a written, binding agreement among those parties that sets forth who's in control, who gets the benefit, and when. However, in order for a trust to control the assets, the assets must actually be in the name of the trust. For example, if I have the Bellomo Family Trust, if I want my house to be in the trust, the deed must actually say “the Bellomo Family Trust” as part of the title.
Typically, we will see it say, “Jeffrey R. Bellomo, Trustee of the Bellomo Family Trust dated October 22, 2019”. The bank account, or other assets that I want to be in the trust, must also have the exact same titling. If the titling is correct, then the agreement between those three parties governs, and what occurs will be set forth clearly in the trust document.
Unfortunately, if the assets are not titled in the name of the trust, then they will be distributed by the way that they are titled. For example, if the asset is titled jointly with Jeffrey and Whitney, when Jeff dies, the asset would transfer automatically to Whitney. This process is called non-probate, and goes outside of the probate process, but is subject to inheritance tax.
Currently, the Pennsylvania inheritance tax to a spouse is zero, so in this specific circumstance, the result would be a zero tax and avoid probate. However, if the account was in Jeff's name alone, and he died, then it would go through his Will, which is the probate process. The executor in his Will would have to go the courthouse and open an estate and follow that process to the end.
If you want your trust to work the way you intended it to, It is imperative that you make sure you have the assets are properly titled into the trust. If you have questions about your assets and how they're titled contact us and we'll help get you the answers you need!