Dear Len & Rosie, We are having our trust updated and have had two different opinions on checking accounts and CDs. Should we have our regular checking account in the trust? Should we have the money market account in the trust? Should we have the CD in the trust?
Frank Dear Frank, Everything should be in your trust, with a few exceptions. Don’t bother going to the DMV to transfer your vehicles into the trust. If you die owning an automobile, your heirs can retitle it in their names at the DMV forty days or more after your death. All they need is your death certificates, the vehicle’s title, and DMV Form REG-5, which is readily available on www. dmv.ca.gov.
Unless your lawyer advises you to do otherwise, do not transfer any retirement account into your trust or name your trust as a retirement account beneficiary. Transferring a retirement account into a trust means you’re cashing in the account, and you’ll have to pay income tax on all of that deferred income all at once. Also, under the SECURE Act passed in 2020, retirement accounts paying into trusts have to be fully cashed out within ten years of your death, whereas spouses can do a spousal rollover to themselves.
The easiest way of dealing with a retirement account is to name your spouse as primary beneficiary, and your children or other persons as contingent beneficiaries. The only reason you would ever leave a retirement account to your trust is if you have a disabled or spendthrift beneficiary who cannot or should not receive the money directly.
If you and your wife name one another as primary beneficiary of each of your retirement accounts, and your children or other chosen heirs are named as contingent beneficiaries, your children will have to cash in their shares within ten years of the surviving spouse’s death, but each child may decide for himself or herself when to cash in his or her share instead of a trustee making the decision for everyone.
We advise our clients to keep their dayto- day checking account outside of their trusts. Instead, keep the account in both spouse’s names and add one of your children to the account when one of you starts slowing down and may need help paying the bills.
When you and your wife die or become incapacitated, your successor trustee will take over, but that cannot happen overnight. It takes a couple of weeks to round up certificates of death or doctor letters to allow for your removal as trustee. If you add someone to your checking account now, it will make that person’s job easier when the time comes. Len & Rosie Len Tillem and Rosie McNichol are elder law attorneys. Contact them at Tillem Mc-Nichol & Brown, 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com.