Here’s what we cover:
Protecting Trust Assets
Once the trust agreement has been signed and assets have been transferred to the trust, the trust agreement is fully operative as to those assets. At this point, there are certain basic steps that the trustee should take.
If an asset is covered by insurance, it should be so protected after it has been transferred to the trust. If insurance is already covering a trust asset, the insurance policy should be revised to add the trustee as named insured on the policy. This can usually be done at no additional cost. When personal property, an automobile, or a residence is transferred to the trust, the trustee should make sure that the particular asset is covered by insurance and that the trustee is a named insured.
If the trust holds certificates of title, stock certificates, or negotiable instruments, those valuable documents should be placed in a safe deposit box. If the safe deposit box holds only trust assets and is in the name of the trustee, there will be no problem in identifying bearer bonds or unregistered securities as trust assets. In addition, by holding the box in the name of the trustee (as opposed to in the settlor’s name alone), there will be someone with immediate authority to enter the safe deposit box upon the settlor’s death or disability.
Identifying the Trust for Tax Purposes
The trust is a separate entity and an identifying number is required for it for income tax purposes. During the settlor’s life, the tax identification number for any revocable trusts will be the settlor’s social security number. The settlor’s social security number should, accordingly, be given to banks, corporations, and others who pay interest or dividend income to the trust during the settlor’s lifetime. A separate identifying number will be required for any irrevocable trusts, which may be obtained from the Internal Revenue Service (see below website).
During the settlor’s lifetime, the trustee of a trust is not required to file a fiduciary income tax return. If the trust is a fully revocable trust, all income will be reported directly on the settlor’s individual tax return (IRS Form 1040). Upon the settlor’s death, a separate tax identification number will be necessary for any trust that is thereby created and funded. The trustee may apply for a tax identification number online at www.irs.gov.
The above article is an excerpt from Estate Planning in Arizona: What You Need to Know, 2nd Edition (Wheatmark, 2019), by Donald A. Loose, republished with the author’s permission.
Disclaimer: Laws change constantly. Specific legal advice should be obtained regarding any legal matter. The information contained on this website does not constitute legal advice and no attorney-client relationship is created.
Donald A. Loose is an Arizona attorney, and the author of Arizona Laws 101: A Handbook for Non-Lawyers, and Estate Planning in Arizona: What You Need to Know. Mr. Loose is a regular guest on radio shows featuring local newsmaker interviews. He may be contacted at email@example.com.