A living revocable trust is the best way of leaving property for the loved one. With a revocable trust, your beneficiaries don’t have to go through a long probate process, which is also costly because of hiring an attorney.
The only problem is there’s a lot more confusion about which assets can and cannot go into a revocable trust. Due to this confusion, many individuals don’t go towards selecting the trust option and choose the will.
Luckily, we’re here to provide clarity on the matter. Here’s a detailed list of assets that can and cannot be placed in a revocable trust. By understanding the info, you can make the lives of your beneficiaries easier.
What Assets Can Be Placed In A Trust?
Let’s come to the important part of the article: the list of assets you can easily put in the name of your trust. After transferring the ownership of assets to the trust, the property will be under the trustee’s name.
1. Bank Account
It’s not possible to put cash in the name of the trust. If you want to leave some cash, the best way to do so is to leave the cash in the bank account (savings account, checking account, safe deposit boxes, etc) and transfer the ownership right to the trust name.
2. Real Estate
Adding real estate (house or lands) on the trust name is a wise decision, especially if your real estate is in a different estate. By adding real estate to the trust name, you’ll ensure that beneficiaries don’t have to go through the probate process in each estate.
3. Investment Assets
If you’ve investment assets like stocks, bonds, or mutual funds, they can be smoothly placed in the trust. To do this, you need to fill out the stock power document. This legal document is used to transfer the ownership of stock or investment assets to someone else.
4. Insurance Policies
Not many individuals know, but their life insurance policies can also be put in the trust’s name. This is one of the best decisions you can take for your family as it saves the insurance money from all creditors.
5. Personal Items
If you own a rare art collection, jewelry, or any tangible property like furniture, electronics, or even clothing, you can transfer to trust. For this, create a transfer document listing all items you want to give to someone (nominate beneficiaries) and transfer it to the trustee’s name.
It’s also possible to transfer your business in the name of the trust for an easy transfer of property ownership. To make this happen, you’ll need to complete the necessary paperwork to transfer the ownership of your shares to the trust.
What Assets Should Not Be Placed In A Revocable Trust?
Here’s the list of assets that can’t be placed in a revocable trust. Besides the list, no property outside of the United States of America can be transferred to the name of the trust. So, if you have one, discuss the ownership transfer process with an estate planning attorney.
- Cash: It’s not possible to put cash into the revocable trust. However, if you want to do this, the legal way is to create a bank account, deposit money and transfer the ownership right of the bank account to the trustee’s name.
- Medical & Health Saving Account: Similar to cash, medical and health savings accounts can’t be transferred in the name of the trust. These accounts are already tax-free, as per law, and no one can transfer them to a living trust. If you’re worried about the assets, you can add your trust name as a beneficiary to distribute them after you pass on.
Apart from cash and medical and health savings accounts, many things are considered that they cannot be placed in the revocable trust. For instance, certain retirement accounts (401-K, IRA, 403-B) and vehicles.
The truth is both the retirement account and the vehicles can be put in the name of the trust. However, trust planning attorneys and experts don’t recommend it because putting them in the name of trust has more cons than benefits.
What Happens To Property Not In A Trust?
Property that’s not in the trust, such as a home, bank account, investment account, personal items, and pretty much everything else, goes through a legal process called probate. If there’s a will, the court follows its instructions to distribute the property among the beneficiaries.
However, when there’s no will, the court makes decisions based on inheritance laws. In such cases, the property typically gets transferred to the deceased person’s family, including the spouse and children.
It’s worth noting that probate can be time-consuming and expensive. A well-organized estate plan with a trust can simplify the distribution of assets, sparing your beneficiaries from unnecessary complications.
The list of assets that can and cannot go into revocable trust is simple. Most things like bank accounts, real estate property, investment assets, insurance policies, personal items and even business can be put under the name of a revocable trust.
Apart from the list, you can add vehicle retirement accounts, but estate planning experts don’t recommend them. For more information and a detailed explanation of why it’s not recommended, it’s best to contact our trust attorney.
Dustin MacFarlane’s primary focus is on Elder Law and protecting families and seniors. He is a Certified Specialist in Estate Planning, Trust, and Probate Law by the State Bar of California Board of Specialization — a rare distinction.
Prior to becoming an attorney, Mr. MacFarlane worked in the Long Term Care industry. After becoming licensed to practice law in January of 2009, Elder Law quickly became his focus. Seeing the need during his former career, Mr. MacFarlane pursued Elder Law as a primary area of practice.