Trust Funding 101: Handling Foreign Accounts and Personal Assets.| Q&A #3

October 16, 2023 Andrew Bethel

Foreign Bank Accounts in Trust

A crucial component often overlooked in estate planning is the management of foreign bank accounts. How does one integrate these into their trust? To clarify, we need to differentiate between two types of 'foreign': out-of-state and out-of-country.

Out-of-state bank accounts are straightforward. If you're a California resident with a trust set up in California but hold an account in, say, Nevada, you'd title this Nevada account into your California trust, much like any local bank account. The process typically involves presenting a copy of your trust to the bank.

Accounts in foreign countries require a different approach. A California trust, or one from any U.S. state, is limited to U.S. jurisdiction. Hence, for bank accounts (or even real properties) overseas, consultation with an estate planning attorney from the respective country becomes imperative.

The Choice Between Pay on Death Beneficiary and Retitling Accounts

If beneficiaries are already listed for your brokerage and bank accounts, should they also be included in your trust? The simple answer: no. When an account has a designated beneficiary, the assets transfer directly to that beneficiary upon your death, eliminating the need for probate and excluding them from your personal or trust estate.

However, it's essential to ensure these designations remain current. Should a beneficiary pass away before you without any changes to these designations, these funds revert to your estate, potentially triggering a probate.

To enhance the safeguarding of these funds, consider naming your trust as a contingent beneficiary. This ensures that, in the event of your primary beneficiary's demise before you, the assets will be absorbed into your trust, averting probate.

Personal Property: To Trust or Not?

When considering personal items, such as jewelry, the common question is whether to include them in the trust. High-value pieces or items you wish to bequeath to specific individuals could be named in the trust. However, often, jewelry is not counted towards probate asset totals. Further, altering their designation in the trust would require a formal amendment, incurring additional legal expenses.

Instead, most estate planning professionals recommend addressing personal items in a separate document, known as the Letter of Instruction. This document can be referred to in the trust, ensuring that its stipulations are followed as if they were part of the original trust agreement.

Moreover, a Pour-Over Will can ensure all assets, including personal items like jewelry, transfer to the trust upon one's death. However, if jewelry is valuable enough to prompt probate, it should be discussed during the trust's creation.

It's also vital to recognize that probate requirements differ by state. It's prudent to consult with a local attorney to determine your state's specific thresholds.