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Right & Wrong Trust Procedures

By   /  Tue 25 Dhul Qidah 1439AH 7-8-2018AD  /  No Comments

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RIGHT WAY

Conveyance Of Real Property To The Trust

  1. transfer the property to Trust by warranty deed. (send copies to be redone not the originals)

REWARDS

  1. no taxes
  2. details kept private
  3. not likely to be subjected to pressure from promoters, salesmen etc.
  4. no disclosure as to values involved when traded (exchanged)

Conveyance Of Personal Property To The Trust

  1. create a detailed list of all properties, personal, etc.
  2. add it to schedule A as part of your Trust with no value specified
  3. make a second list with replacements values specified and keep it in a separate fireproof safe
  4. in the fireproof safe or lockbox in the same name as the Trust, keep the list of replacement values

REWARDS

  1. no capital gains recognizable
  2. able to provide a detailed loss to insurance company to collect insurance in case of fire or theft and regain the value of the property
  3. avoid being taxed personally for property
  4. as the Trust is an artificial entity and does not die, the Trust can keep full value of the valuables in it thereby saving tax money for the estate and avoiding probate

Conveyance Of Stocks And Securities To The Trust

  1. for transfer to the Trust, Stocks and securities should be “street endorsed” to the Trust, send this to the transfer agent, as this avoids broker commissions

REWARDS

  1. establishes bona fide records as to transfer of ownership to the Trust

Conveyance Of Life Insurance To The Trust

  1. Make the Trust beneficiary
  2. make the trust pay the premium
  3. with an irrevocable minutes resolution make the Trust the policy owner
  4. if possible obtain new policy contract

REWARDS

  1. keeps proceeds out of spouse’s estate; can save from 20% to 50% of estate tax
  2. relieves insured of ownership and removes probability of taxing proceeds
  3. it will be acceptable proof to I.R.S. that no premium will have been paid by you, this will save taxes
  4. see No. 3 above

Conveyance Of Motor Vehicles To The Trust

  1. Place vehicles in the Trust name, assuring minimum rates

REWARDS

  1. important assets are protected from liability created by vehicles
  2. you are personally protected from results of suit, the Trust will pay the operating expense, use lease fees etc…before-tax dollars

WRONG WAY

Conveyance Of Real Property To The Trust

  1. transfer to an individual for value received

PENALTIES

  1. disclosed to public; if any gain realized, tax must be filed
  2. may subject you to pressure from immoral people

Conveyance Of Personal Property To The Trust

  1. listing only most valuable items or making no list at all
  2. specify items at cost value
  3. make this list with all cash values specified as part of your Trust
  4. keep this list in lock under your name

PENALTIES

  1. capital gains would be evident and taxes payable
  2. proof of ownership can be difficult or impossible in the case of a fire, making it impossible to collect fire or theft insurance or make replacement to the losses
  3. capital gains tax (may be levied but can be deferred if re invested within 18 months)
  4. lock boxes can be entered by I.R.S. and seized by the bank pending probate in the event of death

Conveyance Of Stocks And Securities To The Trust

  1. only endorsing the stocks and securities over to the Trust
  2. turning them over to your broker for transference

PENALTIES

  1. does not establish transfer of ownership to the Trust, and cost you a commission
  2. will mean the stock may be subject to estate tax because company records still show in your ownership

Conveyance Of Life Insurance To The Trust

  1. making your wife the beneficiary
  2. paying premium personally
  3. retaining ownership as an individual
  4. keeping your old policy upon which you have paid

PENALTIES

  1. adds to wife’s estate; greatly increasing taxes/liability
  2. evidence of ownership creating probable tax liability
  3. increases taxable estate
  4. percentage of premiums you have paid represent the percentage of proceeds which creates a probable tax liability

Conveyance Of Motor Vehicles To The Trust

PENALTIES

  1. if held in trust with a large amount of other property the other property of the trust can be put in jeopardy if the trust vehicle is in an accident or incurs liability, (we suggest that a vehicle or other objects that can incur a large amount of liability be put in a separate trust from other trust assets)
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