Tangible personal property is property (other than real property) that physically exists. It is property that you can touch and feel, such as jewelry, household furniture and furnishings, garden and lawn furnishings and equipment, books, silver, china, glass, rugs, art objects, hobby and sports equipment, collections, clothing, automobiles, airplanes, boats, and the like. It does not include real property or intangible property, such as money, bank accounts, stocks or bonds.
Automobiles and other Vehicles
Transferring an automobile or any other vehicle to a living trust is almost the same as transferring it to a third party. As the owner of the vehicle, you would have to sign the title over to the trustee. Assuming that John Doe is the owner of the vehicle and that he is transferring it to his living trust, the correct title would be:
"John Doe, Trustee of the John Doe Living Trust,
or his successor in trust, u/d/t, dated December 2, 2008,
including amendments thereto."
The trustee would then register the vehicle in his or her capacity as trustee. When registering a vehicle held in trust, the same requirements apply as with vehicles registered in your own name. Most states have a form to apply for registration. The name listed on the registration form must match the name listed on the title. In addition, you will have to present an insurance card indicating that the insurance on the vehicle is listed in the name of the trustee. In addition, many states now check to see whether you are delinquent on any property taxes in your local city or town. If so, you will have to pay the delinquent taxes before you can complete the registration.
Most states will also require either a copy of the trust instrument or a letter from an attorney verifying the name of the trust and the name of the trustee(s). The letter will also have to verify that the trust is in full force and effect.
Some states will impose a sales tax on the transfer of a vehicle to a revocable living trust, based upon the sale price paid by the trustee or the book value of the vehicle, whichever is higher. For many individuals, paying a second sales tax on the same vehicle is totally unacceptable and kills the transfer. In our experience, however, most motor vehicle employees are not very familiar with transfers to a revocable living trust and they do not understand that a sales tax should not apply when the transferor and the transferee are one and the same person. Accordingly, if your state has a sales tax and if your state insists on imposing it in this situation, don’t just walk away. Instead, call your state tax department and make your case with one of its attorneys.
Besides the sales tax, which may or may not be an issue, there are registration fees that will have to be paid. Although those fees are not prohibitive, they are additional fees nonetheless and you may not be inclined to pay them. In that case, there are some optional considerations available to you:
You can wait until the registration on your vehicle expires; then make the transfer to the trust and have it registered in the name of the trustee. That would avoid duplicate registration fees and a second sales tax on the same vehicle.
If you plan to replace your vehicle with another vehicle in the near future, you could wait until then and have the new vehicle registered in the name of the trustee. Again, that would avoid duplicate registration fees and a second sales tax on the same vehicle.
The potential problem with either of those options is that - to be frank - you might die before you actually make the transfer. In that case, the vehicle would be in your name and would have to go through some type of probate. That might not be too bad if your state has a summary (simplified) administration for small estates. For example, many states have an expedited probate if the value of the entire probate estate is less than a specified amount, generally $20,000, or $40,000, or even $100,000 in some states. However, if the value of the vehicle, combined with other property that may have been excluded from your living trust, exceeds that amount, then a summary probate may not be available and a full probate may be required. In addition, the cost of the probate proceedings may far exceed the costs associated with a transfer of your automobile to the living trust.
Less than one percent (1%) of all vessels in the United States are documented with the Coast Guard, while most pleasure boats are registered through the various states.
A vessel that is at least five (5) net tons (generally more than 25 feet in length) and wholly owned by one or more U.S. citizens is eligible for federal documentation. 46 C.F.R. § 67.5. Vessels requiring federal registration are described in 46 C.F.R. § 67.7. Vessels excluded or exempt from registration are described in 46 C.F.R. § 67.9 . To register a documented vessel in the name of a trust, federal statutes require that all trustees and all beneficiaries with an enforceable interest in the trust be U.S. citizens. 46 C.F.R. § 67.36(a).
In addition, the following documents must be submitted to the Coast Guard:
- Certificate of Documentation, if one exists
If you have a documented vessel that you wish to transfer to your revocable living trust, the documents listed above should be sent to:
United States Coast Guard
National Vessel Documentation Center
792 T J Jackson Drive, Falling Waters, WV 25419
The documents and additional information concerning vessel documentation may be obtained by going to www.uscg.mil/hq/g-m/vdoc/nvdc.htm.
Most small boats that are used for recreational purposes are not documented through the Coast Guard. Instead, they are registered at the state level, either through the department of motor vehicles or the department of natural resources. In many states, the registration of a boat is similar to the registration of an automobile. However, each state is different so you should check with your state to obtain the correct registration information and the documentation needed. In addition, if the boat is financed, you should review the loan documents to be sure that the transfer complies with the bank or other lending institution's requirements. If you have insurance on the boat, you should also check with the insurance company to be sure that the trustee of your living trust is the named insured.
Airplanes are registered by the United States Department of Transportation. In order to transfer an airplane to your revocable living trust, you must provide the following information and documentation to the Federal Aviation Administration (FAA):
- AC Form 8050-2 (Aircraft Bill of Sale)
- AC Form 8050-1 (Aircraft Registration Application) [Not available for download]
- Affidavit of Citizenship
- Certified copy of the trust instrument
- A $5 check or money order made payable to 'United States Treasury'
Please note that the Aircraft Registration Application, AC Form 8050-1, is not available for download. Only original forms are acceptable for the registration of aircraft. The use of an original Aircraft Registration Application, AC Form 8050-1, is required. Photocopies and computer-generated copies are not acceptable for the registration of aircraft.
For more complete and detailed information, please go to the FAA's website.
Other Tangible Personal Property
There is no formal title or registration for much of the tangible personal property that most of us own. For example, no title or registration is required for jewelry, household furniture and furnishings, garden and lawn furnishings and equipment, books, silver, china, glass, rugs, art objects, hobby and sports equipment, collections, clothing, tools, etc.
Generally, these items do not present a major problem from an estate planning standpoint. However, there are certain issues that should be addressed in terms of transferring these items to your revocable living trust. For example, if you become incompetent, your trustee will not have the authority to manage or dispose of these properties. Unless you have a durable power of attorney, a guardian or conservator may have to be appointed. If you were to die owning these properties, their value may be high enough to require a full probate of your estate.
If you take the time to establish a living trust and then transfer your home and automobiles and investment assets to your trust, you should also take the time to transfer your tangible personal property as well. Transferring items of tangible personal property is not difficult and will not result in any significant alteration of your lifestyle.
The actual transfer of tangible personal property, when there is no formal title or registration, is generally accomplished by a bill of sale or a deed of gift. Generally, a deed of gift describes general categories of tangible personal property that is given to the trustee rather than listing specific items. An exception is made when there are specific items that have significant value. You should exercise your own judgment in deciding whether to list specific items or just list general categories. You may also sign as many deeds of gift as you feel are necessary to accomplish your objective of transferring all of your tangible personal property to your trust. For a specimen deed of gift covering general categories of tangible personal property, see Figure 1 (General Deed of Gift to Revocable Living Trust). For a specimen deed of gift covering specific items of tangible personal property, see Figure 2 (Specific Deed of Gift to Revocable Living Trust).
Despite the transfer of tangible personal property to your living trust, you probably want those items to remain in your possession so that you can continue to use them. That is not an issue if you are the sole trustee. Nonetheless, it is probably wise to include a sentence in your deed of gift to that effect. See Figure 1 (General Deed of Gift to Revocable Living Trust).
Another issue to consider is after-acquired property. For example, if you give the trustee a deed of gift today, what happens to the personal property you acquire tomorrow? Some people handle this issue by stating in the deed of gift that after-acquired tangible personal property belongs to the trustee. Others prefer to give a new deed of trust each year. For an example of a sentence relating to after-acquired property, see Figure 1 (General Deed of Gift to Revocable Living Trust).
If any of your tangible personal property is insured, make sure you notify the insurance company about the transfer of the property to your living trust.
This is an important question. After the death of the creator of a trust (identified after death as the "decedent"), if tangible personal property (i.e., jewelry, artwork, furniture, collections et cetera) has been transferred to a revocable trust, then the successor trustee of the trust will control the tangible personal property. However, if the tangible personal property has not been transferred to a trust, then upon the decedent's death, the disposition of the tangible personal property will be governed by the decedent's will. The will and the trust may not transfer the tangible personal property to the same individuals, and this can be a hotly contested issue if the value of the tangible personal property is significant. Thus, the best way to ensure that the decedent's intent to vest the ownership of the tangible personal property to the trust is clear is to execute a bill of sale. The bill of sale should identify the tangible personal property transferred to the trust with sufficient detail so that there are no problems understanding what property is transferred to a trust and what property is not transferred to the trust. It is also a good idea for the trustee to confirm receipt of the tangible personal property.
Without a bill of sale, it will be very difficult to prove that the decedent intended to transfer his or her tangible personal property to the trust. For additional information, contact Cody & Linde, PLLC today!