When I meet with clients for the first time, a common question is what goes into a trust and what does not. The question before that is – what is a trust? Let me begin with the definition of a trust and then list not only what goes into one, but also what doesn’t.
A trust holds and distributes your hard-earned assets during your lifetime and upon your death, as you have designated. A trustee, generally yourself, manages and distributes the trust assets according to the terms you designate in the trust.
When you set up a trust as part of your estate plan, you fund the trust – that is, you transfer ownership of selected assets into it.
Assets commonly in a Trust include:
- Real estate (your primary residence, vacation home, and rental or investment properties).
- Bank accounts, including checking and savings accounts (if allowed by the bank), and Certificates of deposit (CDs) – but confirm that with the bank.
- Investment accounts, such as brokerage accounts (stocks, bonds, and mutual funds), and non-retirement investment portfolios.
- Business interests such as ownership in LLCs, partnerships, or corporations (but check the operating agreement first).
- Valuable personal property such as jewelry, art, antiques, collectibles, and sometimes vehicles (but this can depend on state laws and value).
- Life insurance (in some cases) whereby you can name a trust as the beneficiary of your life insurance policy, which can be useful for tax or control reasons.
- Intellectual property, including copyrights, patents, and royalties.
Assets That Do Not Go into a Trust:
- Retirement accounts, including IRAs or 401(k)s – these stay in your name to preserve tax advantages.
- Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), though you can name the trust as a beneficiary.
- Vehicles- I know it is listed above, but everyday-use cars are often left out due to titling fees, depreciation, and insurance issues.
- Bank or investment accounts with POD or TOD designation; that is, if they are accounts with “Payable on Death or Transfer on Death they already pass outside of probate.
- Annuities (Sometimes) These are often not retitled in a trust due to tax and contractual complications; best to check with the annuity provider.
As you can see, it is relatively easy to understand what goes into a trust and what does not, but there are exceptions. And those exceptions, in fact, all of this, are why it is so essential to work with an experienced estate planning attorney who understands what your goals are for your loved ones. Estate planning should never be a “DIY” because one simple mistake in your estate plan can cause your heirs all kinds of issues, leading to family arguments, delayed asset distribution, and potentially a lot of legal fees to sort it out. No one wants that for their loved ones.
If you are ready to establish your estate plan or have one that needs to be updated, please call me to schedule a consultation. I look forward to working with you. My phone number is 513-399-7526. Alternatively, you can visit my website at www.davidlefton.com