Using a Memorandum of Trust to Simplify Estate Plans

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Hans Jasperson has over a decade of experience in public policy research, with an emphasis on workforce development, education, and economic justice. His research has been shared with members of the U.S. Congress, federal agencies, and policymakers in several states.

One significant advantage of forming a revocable living trust is the privacy it affords and a memorandum of trust can help preserve this privacy. The memorandum is an abbreviated or synopsized version of the entire trust document. This shortened form allows the transfer of assets into the trust while preserving the identity of the grantor and trustees.

Living trusts avoid probate. The extent of what you own and who you're leaving the property to at your death does not become a matter of public record like a last will and testament does when it's presented to the court for probate. An affidavit of trust or memorandum of trust helps to keep your personal business just that—personal—during your lifetime as you fund your trust as its trustmaker or grantor.

Understanding Revocable Living Trusts

All revocable trusts are living trusts because of the way they are created. Living trusts are created while the grantor is living and are sometimes called inter vivos trusts. A person or entity—like a bank—is named as the successor trustee who will oversee and manage the trust on your behalf after your death. Living trusts do not protect the included assets from being attached or claimed against in a legal proceeding.

Funding a revocable living trust involves moving ownership of your assets from your individual name into that of your name as a trustee. You are a component of your trust as its trustee, so you no longer personally own the property. You can still use and have access to the property included in the trust and can change beneficiaries at will.

The living or revocable trust is the mechanism which avoids probate. On the event of your death, the named trustee will continue to manage the trust and distribute the property. By avoiding probate your estate and beneficiaries avoid court cost, attorney fees, and the lengthy process. Also, the information contained in the trust does not become public information. This probate-free function is especially helpful for those wishing to pass on ownership and control of small businesses.

Irrevocable Trusts

You may also hear of irrevocable trusts as you create your estate documents. Using a revocable trust allows assets to stay in the grantor's estate and contain terms that may change. The irrevocable trust moves these assets out of the estate and into the trust. The terms of the irrevocable trust can not be changed without beneficiary approval after it is created. Also, in most cases property in an irrevocable trust can't be claimed against during legal proceedings.

How to Use an Affidavit or Memorandum of Trust

When you approach a financial institution to direct that ownership of an asset held by you should be transferred into the trust—and to you as trustee—the institution will almost certainly want a copy of the trust agreement for its files. You may not want to hand over a copy of your trust agreement and leave it on record with the institution. The document details all your assets and property and who they will eventually transfer to at your death.

You can keep these provisions of your revocable living trust private by asking your attorney to prepare a short affidavit of trust or memorandum of trust instead. This document will contain the abbreviated information that, in most cases, is all a financial institution needs to know.

What Most Memorandums of Trust Include

• Who created the trust and when
• The name to be used for the trust
• The fact that the trust is revocable and can be changed at any time
• Who is named to serve as the initial trustee or trustees
• Who is named to serve as the successor trustee or trustees to take over when the initial trustee dies or becomes incapacitated
• What powers the trustee can exercise over the trust assets, and
• Who signed the trust agreement

Requirements for Recording a Memorandum of Trust

You may also want to fund your trust with real estate such as your home. It will require preparing and recording a new deed transferring ownership from yourself as an individual to yourself as trustee. Your state or county might also request a copy of your trust agreement for this purpose.

The affidavit or memorandum may also be recorded in place of your entire trust agreement in the public records of states or counties that require trust documents to be recorded along with the deeds that transfer the property.