One of the most commonly “missed” properties that should be owned by your living revocable trust is your LLC or corporation.
One of the principal uses of a revocable living trust is to avoid probate. However, the majority of people who get a living trust don’t avoid probate. Their family takes everything through probate just like the people who have a simple will.
The problem is the attorneys and living trust advocates don’t teach you how to “use” the living trust. There are lots of things you need to do to get the promised benefits out of your trust.
For example, the living trust has to be “funded.” That means the trust has to “own” the property. Everything you need to sign your name for in order to transfer ownership of the property needs to be owned by the living trust, if you want it to avoid probate.
The house, bank accounts, safe deposit box, and everything else you sign your name for needs to be owned by your living revocable trust. Even the few families that really “get” the use of a living trust often forget to protect their business.
Whether your business is small or large, you “own” it. It may truly be the most valuable asset you have. Your ownership of the company is the stock (corporation) or membership interest (LLCs).
The vast majority of small business owners never even issue the stock certificates or membership interest certificates. That creates asset protection problems, but that’s another story.
As far as the probate issue is concerned, the stock in your little corporations or the membership interests in your LLC needs to be issued in the name of your revocable living trust.
If you have already issued stock or membership interests in your own name, you will have to get the certificate and “turn it in” to the company. The company (you) will void the certificate and report the transaction on the stock or membership interest log.
Then a new entry will be entered into the log and a new certificate will be issued in the name of your living trust. You need to get the name of the trust right, including the date, or the business will still be probated.
If you don’t have a ledger or certificates, you can get them at your local office supply store. They will cost between $15 and $50.
If you would like me to send you a free computer file, so you can prepare your own log book and your own certificates, simply email me at firstname.lastname@example.org and put “Trust ownership log and certificates” in the subject line.
Once the trust “owns” the company, it will not be subject to probate when you die. Obviously, if your dad or mom owns the company, it will be in your best interest to make sure this is done to avoid probate on the business.
The trust does not need to own the company checking account and other assets of the company, because it will “own” those assets by owning the company.