You work hard making money and doing your best to grow your assets. I know that and I commend you for it. I really do. But have you overlooked the proper way to title your assets? If so, all your hard work could be in vain. Let me give you an example to illustrate how important this is.
Let’s assume you go through all the trouble and expense of creating a living trust. The only problem is you neglect to change the title of your home from your own name to that of the trust.
If that happens and you pass away, the house won’t be treated as part of the trust. Instead, it may have to go through probate which is a long, painful and expensive process. Keep in mind that just because you create a trust you still have to re-title assets if you want the trust to have any effect. This is true even if you specify your assets in the trust.
And if that happens, your heirs could easily lose 75% of the value of the asset during the process. That’s a bitter pill to swallow after working your tail off to pay the mortgage for 30 years. What really stinks about this is that you set up the trust to avoid exactly this problem. Alas if you don’t title your asset correctly, all your efforts could be for naught. I’m confident that I’ve got your attention now.
When To Re-Title Assets
Whenever you want to change the ownership of an asset, you have to retitle it. So as I said above, if you create a trust and you want it to control certain assets, you have to change the title of those assets in order for the trust to have effect. If you get married and you want to share your assets with your spouse (or you want to share your assets with another person for some other reason) you have to retitle your assets as well.
Keep in mind that once you retitle your assets there may be no going back. That’s why it’s super important to get expert legal advice from a qualified attorney before taking this step.
How To Re-Title Your Assets
Once you decide that you want to retitle your assets and you understand exactly how the asset needs to be held it’s very easy to get this done. Real estate is usually retitled by your attorney or by an inexpensive legal-self help service.
He or she will draw up a new deed and have it recorded. If you still have a mortgage on your property, the lender may have to sign off but that’s usually not a problem. This is something you could do yourself but I wouldn’t advise it. Anyway, if you pay an attorney to draw up your trust, moving real estate into the trust should be included in the price.
If you own financial assets the process is even easier. Simply contact the custodian, brokerage firm or bank. Provide them with either a copy of the trust or a trust abstract. With that information, they‘ll prepare a one page document for you to sign. Once you put your John Hancock on the bottom lie, you’ll be done. Just to make sure to keep a copy of what you signed.
This proves that you did retitle the accounts just in case the bank or brokerage firm losses the document. Believe it or not, this happens all the time.
Don’t Re-title Retirement Accounts
Everything we spoke about above relates to your assets outside of retirement accounts. When you change your marital status, create a trust or have some other major life event, you may want to change your retirement account beneficiaries. But that’s not the same as re-titling the account itself. Changing the ownership of your retirement account has vast tax consequences (on top of the fact that once you do this you kiss your retirement account goodbye). There are very few instances when that ever makes sense.
Creating wealth without paying attention to how your assets are held is dangerous and jeopardizes all your hard work. Make sure you take the time to review how each of your assets are held and if that structure is appropriate. It’s best to do this with a qualified legal advisor. If the assets aren’t titled correctly, it’s a simple matter to fix.
Have you reviewed your accounts and properties recently? Are they titled correctly? How do you know?