List Specific Gifts in Your Trust
To list personal tangible property as Specific Gifts in your trust, some thoughts.
In the beginning, when I was new to estate planning, I ran across trusts of every shape and size. Each looked quite different than the next and I wasn’t sure what the rhyme or reason for it was. In particular, I was very confused why some trusts had long lists of personal tangible property in the trust document itself whereas others hardly said anything to that effect. One trust might have listed a grandfather clock, guns, jewelry, vehicles, and on and on, but other trusts might not mention a single personal property item. This was confusing to me until I realized there were a couple of concepts going on in trusts which can confuse the situation. The first is the desire for the attorney to ensure the items in a person’s home are placed in trust. This is primarily done through either the trust document itself or through an attachment to the trust document itself. The second issue arises when it comes to the distribution—who gets what personal property? Who gets the dining room set? Who gets what gun? Who gets which jewelry and which painting, etc?
One of the problems with stating that a person is placing their cars, home, things in their home, bank accounts, investment accounts, etc. in trust is that when they, years later, after signing, review the document they believe, many times, that all those things are in trust because in the trust it states they are in trust.
Unfortunately, simply listing something as being in your trust does not put an item in trust. For example, when it comes to real estate, a deed must be created and signed indicating that a person wants a certain piece of real estate to be made subject to their trust agreement. Banks have paperwork that indicates who owns an account or whether or not an account is made subject to a trust account and whether or not any beneficiaries are named on that account.
Just because a trust document indicates a bank account it is “in the trust” does not make that bank account subject to the trust agreement nor does it make the trust a beneficiary of that bank account. That needs to be done on the bank’s paperwork. The same goes for other titled assets. Simply stating that your car is in trust does not put it in trust unless the car is actually put in trust by having the title changed indicating that it is subject to the trust or by naming the trust as a beneficiary on the Oklahoma Tax Commission Form #771 and filing it at the Tag Agency
So, listing these things in the trust, if not done properly, may lead to confusion leading the person who created the trust to believe the items are in fact in trust when they are not. Estate planning can be confusing, and many people are confused by it. When the time arises when the person who created the trust may have a health issue arise, starts developing dementia or Alzheimer’s, or simply feel the time is right, they may have their family review the trust. When they review it, they see that it says that all of these things are in trust. They erroneously believe that because it says that these things are in trust, they believe their dad has taken care of everything. But upon his death, they learn that his house was not in trust because the deed did not mention the trust, the bank accounts are not in trust because he never took the trust to the bank and asked them to make the account subject to the trust agreement, the life insurance is not in trust because the trust was never named as a beneficiary to the life insurance, and so on. This is extremely frustrating to families and quite frankly they think that it is ridiculous that a trust can say that something is in trust and in fact, it is not.
Our opinion is that it is much better to not list a person’s piece of real estate inside the trust itself unless that person intends to give that house specifically to one person. Such as a son or daughter who has been living in that house and they would like them to have that house. Also, we believe it is best not to list the cars in the trust, but rather list the Trust as a beneficiary via Oklahoma Tax Commission Form #771, due to the fact more than likely that car will be sold or otherwise replaced before the person passes away.
But what about listing things that a person doesn’t think they will get rid of, such as jewelry that has been passed down from generation to generation, a grandfather clock, or certain guns? A person would certainly want to indicate that these items are now subject to the trust, and this can be done generally, as previously mentioned, either as an attachment or in the trust document itself. However, when it comes to the distribution, a person should be careful in presenting a big list of items to their attorney to be included as specific gifts to certain people in their trust or Will. The reason is that, in our experience, this is the number one thing that causes modifications to Trusts and Wills. People have certain property they want to go to certain people and maybe something happens to that piece of property and now they want to give that person something else. This requires an amendment, which means there is an expense associated with the attorney preparing the codicil to the Will or an amendment to the trust.
Additionally, someone may state that they want a certain relative to have the grandfather clock and later decide that they want someone else. Again, there is a codicil or an amendment. We believe a better approach might be to include a provision in the trust that allows a person to make a list later and even change the list from time to time as they wish, specifically stating who is to receive certain property. The trust can specify the requirements for doing this such as whether there needs to be witnesses or a notary, whether it should be handwritten, or whether it may be typed.
Finally, the person may want to discuss with their attorney any restrictions they would like applied to this list. For example, it is probably not wise to allow for someone to state that a percentage or the entirety of a company they own, their home, or their investment account is to be given to a certain person. High-value items such as these should probably not be allowed to be included on what we might call this “specific gift list”. You would not want an unscrupulous family member or some other person talking to someone who is starting to develop dementia and convince them to sign one of these specific gift lists that gives them the family farm, their investment account, or $200,000 in cash. The body of the trust itself should restrict what can be included on this list to avoid these unfortunate situations.
If you have any questions about this, please feel free to contact us.
