What Assets Can You Not Put in a Trust?

A revocable living trust can be a powerful part of your estate plan. It can keep your loved ones from having to deal with probate. It also provides more privacy than a will. But you should leave certain assets, like cash and retirement accounts, out of the trust.

This article explains which assets you should not put into your trust. Trust laws vary by state. It’s best to talk to an estate planning attorney in your area for help. They can ensure your trust is funded correctly and meets your goals.

What Is a Revocable Living Trust?

A revocable living trust (RLT) is a type of trust that’s a popular tool for estate planning. It’s a legal document that can replace your last will and testament. Like a will, you can use an RLT to distribute your personal property when you die. But it has the added benefit of avoiding the time-consuming and expensive probate process. In avoiding probate, an RLT also provides more privacy than a will.

When you make an RLT, you’re called the grantor. The trust beneficiaries are the people who get your property when you die. The property you put in the trust is the trust assets. The trustee is the person who manages the property you put in the trust.

They will distribute your property to the trust beneficiaries. The trust document also includes your instructions for distributing your property. Retitling your assets in the name of your RLT is called funding the trust. The types of assets you can use to fund your trust include the following:

• Real estate
• Valuable personal property like collectibles, artwork, and jewelry
• Money market accounts, brokerage accounts, and other investments and savings accounts
• Safe deposit box
• Businesses you own

Which Assets Should I Leave Out of My Trust?

Not all your property belongs in your RLT. The following are some of the assets you should leave out:

• Retirement accounts: Retitling qualified retirement accounts in your trust triggers income tax obligations. Qualified retirement accounts include 401(k)s, 403(b)s, IRAs, and qualified annuities.
• Health savings accounts (HSA) and medical savings accounts (MSA): You can use your HSA and MSA money to pay qualified medical expenses. Since these accounts are tax-free, you can’t put them in your trust.
• Financial accounts you use to pay your bills: You can move your active bank accounts to your RLT, but that’s only advisable if you have complete control over the account. You can use a beneficiary designation on your bank accounts to transfer them outside of the probate process. So most people find it easier to leave these accounts in their name.
• UGMA/UTMA accounts: You may open a Uniform Gifts to Minors Account (UGMA) or a Uniform Transfers to Minors Account (UTMA) to benefit your minor children. But if you include these in your trust, your RLT could end up in probate court if you’re the trustee and you die before your child becomes an adult.
• Vehicles: Transferring your car to a trust could trigger title transfer fees and taxes. Some states let you transfer vehicle ownership after you die outside of probate. So putting your car in your trust wouldn’t be necessary.
• Life insurance policies: It’s better to name your trust as your life insurance beneficiary than to put the policy itself in your trust.

Contact an Estate Planning Attorney for Help

Trusts provide some benefits over a will for estate planning. But funding it can be complicated. An experienced estate planning attorney can advise you on which assets you should and shouldn’t put in your trust.