Funding/Accessing Trust Assets

We have a client who is listed as his parent’s first choice to be the Successor Trustee of their Living Trust.  He asked me a couple of questions on funding the Trust and on accessing the assets in the Trust as a Successor Trustee.  As these questions come up often, I thought that there might others out there who would appreciate this discussion!

If your parents (the “Settlors” of their Living Trust) deed their home into their Trust, they or their successor trustee can deed it back out.  If they elect to take out any type of mortgage (including a reverse mortgage) upon that home, the lender will probably require that it be Quit Claimed back into their individual names.  However, if they choose to sell it while it is titled in the name of the Trust, they can do so by signing the Deed as Trustees of the Trust.

Depending upon the specific terms of the Trust document, a successor trustee usually is in a position to accept that role upon the death, resignation, or incapacity of the initial Trustee(s).  You will also have to examine the terms of the Trust to identify how “incapacity” is to be determined.  A close examination of that language may result in a desire to simplify the process of how the determination is made.  When a successor trustee steps into his or her role, they do so by first signing a document titled “Acknowledgement of Trust”. 

As a Successor Trustee, and after signing an acknowledgement of Trust, one will most likely also have to sign a “Certificate of Trust” to establish his or her right to take control of all assets titled in the name of the Trust.  An important key to remember is that assets actually have to be conveyed into the Trust.  It is not sufficient to list them on a schedule attached to the Trust.  So, let’s assume that the Settlors’ house, CDs, bank and credit union accounts, etc. are all titled in the name of the trust.  Then, upon accepting one’s appointment as a successor trustee, and after providing a Certificate of Trust to the title agency, bank, and/or credit union, one should be given complete control of those assets which have been titled in the name of the Trust.

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