American Indian Owned Law Firm

3 assets you need to keep out of your living trust

On Behalf of | Oct 20, 2022 | Probate & Estate Planning

We all want to pass down a little something to the people we love and care about when we die. And one of the most effective estate planning tools you can use to safeguard your legacy and protect your loved ones’ future is a living trust. One of the primary advantages of setting up a living trust is to help you avoid probate.

Once you set up your living trust, you have to add assets to it. While funding trust is a continuous process, it is important to understand that not every asset belongs in your living trust. So what assets should you keep out of your living trust?

Your retirement accounts

Adding retirement accounts like IRAs, 401Ks and annuities to your living trust is never a great idea. If you do, the implication would be that these funds will be subjected to taxation during the transfer; and this negates the whole essence of creating a trust.

Your health savings accounts

As the name implies, you probably set up these accounts to take care of your medical bills. However, since they are already exempt from taxation, you do not have to add them to your trust. If you have to link them to the living trust, then consider naming the trust as a beneficiary.

Your movable assets

No law prohibits you from including your jet, cars or boats in your living trust. However, it takes a lot of time and paperwork to change these assets’ titles before adding them to your living trust.

A living trust is a powerful estate planning tool. However, it is important that you set it up properly to ensure that it serves your needs.