Titling accounts to the trust and specifying the trust as beneficiary

[Kris989]

Jurisdiction

California

Hi. My wife and I just had our trust drawn up, so now we are working on funding. Our lawyer gave us pretty clear instructions, but in some cases the wording just seems a bit odd to me. I'm not doubting it's correct, but I'm the type of person that wants to understand "why" as much as I want to understand "how".

The first is the wording for titling our financial accounts. The wording is "JOHN DOE AND JANE DOE, trustees of the DOE REVOCABLE TRUST DATED OCTOBER 14, 2021". I did some searching and this seems pretty standard. However, when I read this literally, it seems to title to John Doe and Jane Doe, not to the trust. Why are the trustees even mentioned and how does mentioning them as they are still result in titling to the trust and not John and Jane Doe? How is this any different than something like "JOHN DOE AND JANE DOE, residents of 123 MAIN STREET", or some other wording that describes who John and Jane are?

The second is the wording for specifying our trust as beneficiary for our life insurance policies. The wording is "the then acting trustee of THE DOE REVOCABLE TRUST DATED OCTOBER 14, 2021". He also suggested this wording to specify the trust as POD beneficiary for any smallish bank account that we use regularly. My guess is the reason for using POD instead of titling is to simplify check writing, but I'm not really certain. In any case, this once again seems to leave the assets to the trustee, not the trust. Also, it's not clear what happens if there are multiple co-trustees.

Thanks for your help!

 

[Zigner]

The titling is to you as the trustees of your trust...not to you personally.
The bank account is stating that it goes to the trustee of the trust, not the person personally.

 

[Kris989]

The titling is to you as the trustees of your trust...not to you personally.
The bank account is stating that it goes to the trustee of the trust, not the person personally.

But what is implied by that distinction? That the assets must be managed according to the trust's instructions? And why not just title to the trust itself? I don't understand why the trustees have to be mentioned.

 

[army judge]

But what is implied by that distinction? That the assets must be managed according to the trust's instructions? And why not just title to the trust itself? I don't understand why the trustees have to be mentioned.

You paid an attorney to create your trust.

If you have questions about your trust, why not ask your attorney?

Do you really trust anonymous entities on the internet with your important financial matters?

I'm not doubting it's correct, but I'm the type of person that wants to understand "why" as much as I want to understand "how".

It is best to discuss things you don't understand about your trust with someone you trust and know. That's the attorney you paid to create your trust.

 

[Tax Counsel]

However, when I read this literally, it seems to title to John Doe and Jane Doe, not to the trust. Why are the trustees even mentioned and how does mentioning them as they are still result in titling to the trust and not John and Jane Doe? How is this any different than something like "JOHN DOE AND JANE DOE, residents of 123 MAIN STREET", or some other wording that describes who John and Jane are?

In a number of states, including mine and perhaps yours as well a trust cannot hold property itself. Trusts are not separate entities in the same way a corporation or LLC is. Without delving much into the legal theory behind trusts, suffice to say here that they are a legal arrangement in which the trustees hold legal title to property for the benefit of the trust beneficiaries, who are the beneficial owners of the property. As a result, the trustees don't own the property but do have it titled in their name as trustees while they hold it for the beneficiaries. Thus, it is very important in this case to specify their role as trustees in the deed. It's the same answer to your question about the insurance policies. They go to the trustees to hold for the beneficiaries — there is no real separate entity that holds the trust assets in its own name (though often we tend to think of trusts that way).

 

[Kris989]

In a number of states, including mine and perhaps yours as well a trust cannot hold property itself. Trusts are not separate entities in the same way a corporation or LLC is. Without delving much into the legal theory behind trusts, suffice to say here that they are a legal arrangement in which the trustees hold legal title to property for the benefit of the trust beneficiaries, who are the beneficial owners of the property. As a result, the trustees don't own the property but do have it titled in their name as trustees while they hold it for the beneficiaries. Thus, it is very important in this case to specify their role as trustees in the deed. It's the same answer to your question about the insurance policies. They go to the trustees to hold for the beneficiaries — there is no real separate entity that holds the trust assets in its own name (though often we tend to think of trusts that way).

Ah! Thank you. So trusts can't actually hold legal title but the trustees can, but for the benefit of the trust beneficiaries. That was the lightbulb moment I needed. It all makes sense now.

 

[Kris989]

You paid an attorney to create your trust.

If you have questions about your trust, why not ask your attorney?

Do you really trust anonymous entities on the internet with your important financial matters?

It is best to discuss things you don't understand about your trust with someone you trust and know. That's the attorney you paid to create your trust.

I did plan on asking him, and have some other questions for him too, but first just wanted to better educate myself on the matter. As for him being someone I trust, I don't know him well. I just hired him to do our estate plan and he has good online reviews. However, in working with him I find he tends to move quickly, and mostly just wants to make sure I understand what I need to do, and is not that good at letting me know why. This is probably what most people want. They don't like the dirty details, but like I said, I want to know "why" as much as I want to know "how".

 

[Zigner]

I did plan on asking him, and have some other questions for him too, but first just wanted to better educate myself on the matter. As for him being someone I trust, I don't know him well. I just hired him to do our estate plan and he has good online reviews. However, in working with him I find he tends to move quickly, and mostly just wants to make sure I understand what I need to do, and is not that good at letting me know why. This is probably what most people want. They don't like the dirty details, but like I said, I want to know "why" as much as I want to know "how".

From one side, the reason many people want that type of attorney is that it saves money. From the other side, if the attorney quoted you a flat rate, then every additional moment spent on your matter costs the attorney money.

Edit: I understand and appreciate your desire to know "why".

 

[zddoodah]

Our lawyer gave us pretty clear instructions, but in some cases the wording just seems a bit odd to me. I'm not doubting it's correct, but I'm the type of person that wants to understand "why" as much as I want to understand "how".

So...you asked your lawyer the "why" questions, right?

The first is the wording for titling our financial accounts. The wording is "JOHN DOE AND JANE DOE, trustees of the DOE REVOCABLE TRUST DATED OCTOBER 14, 2021". I did some searching and this seems pretty standard. However, when I read this literally, it seems to title to John Doe and Jane Doe, not to the trust. Why are the trustees even mentioned and how does mentioning them as they are still result in titling to the trust and not John and Jane Doe?

Assets get titled in the name of the trustee, in his/her capacity as trustee. I'm sure there's a "why" answer that goes back to medieval England, but I don't know what it is. Suffice to say, "that's how trusts work" is a sufficient answer for most folks.

He also suggested this wording to specify the trust as POD beneficiary for any smallish bank account that we use regularly. My guess is the reason for using POD instead of titling is to simplify check writing, but I'm not really certain.

If you want to know the reason why Person X told you something, the best thing to do is ask Person X.