Q: Must a living trust mention future proceeds from accounts where the trust is the beneficiary (life ins, POD acct, etc.)?
I understand that a living trust must be funded, for example, by assigning interest in tangible property, assigning vehicle title, changing ownership of financial accounts to the trust, and that these items are listed as the property of the trust. My question is about assets that would transfer to the trust upon death, such as life insurance benefits or payable-on-death accounts listing the trust as a beneficiary. Should these be listed explicitly inside the trust anticipating the future transfers (e.g., "the proceeds of any life insurance policy on which this trust is the beneficiary")?
A: In Colorado, all trusts have four moving parts: a creator, a manager, a beneficiary, and some valuable assets. The valuable assets in the trust (called the "res" in some legal reference materials) are often just listed as "a dollar, and any other assets transferred in the future." So you can create the trust with essentially nothing by funding it with a nominal cash transfer from your own pocket. It is also common to "pour over" some of your personal property into your trust by a special function in your will. When you pass away, a properly formed "pour over will" transfers your assets to the trust. But be cautious! If you plan to transfer a bank account into your trust when you pass away, you very likely need to indicate that desire to the bank by completing a transfer-on-death (TOD) or a payable-on-death (POD) form. The POD and TOD selections you make with your banks and securities accounts are not overcome by language in the will. Thus, if you want your bank accounts and securities to go into the trust, make sure you list the trust as the POD and TOD beneficiary. But there is no need to write any special language into the trust documents to "anticipate" the transfer when you pass away.
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