By Ruth Fortune
When you create a revocable trust, also known as a living trust, one major benefit is probate avoidance, meaning assets in your revocable trust can be distributed to your beneficiaries without going through probate.
But, this begs a question we are often asked:
What assets belong in a trust?
Assets that DON’T belong in a trust
Retirement accounts definitely do not belong in your revocable trust – for example your IRA, Roth IRA, 401K, 403b, 457 and the like. Placing any of these assets in your trust would mean that you are taking them out of your name to retitle them in the name of your trust. The tax ramifications can be disastrous.
Retirement accounts almost always have beneficiaries listed so. You can list your trust as a beneficiary on retirement accounts after consulting with an estate planning attorney because there can be an unfavorable tax outcome if not done properly.
Also, make sure the custodian, which is the financial institution(s) where your retirement accounts are held, beneficiaries listed. Also be sure to update the language in your trust to reflect your current wishes and desires.
Assets that DO belong in at trust
Other than retirement accounts, virtually all other assets can go in your revocable trust. These may include:
- Your house or other real estate, even if you still have a mortgage
- Your bank accounts
- Your non-retirement investment accounts that have your stocks, bonds, mutual funds and the like
- Any other type of ownership interest in a business, such as an LLC
- Your personal property, such as your jewelry and furniture
So how do you put things in a trust? (aka “fund” the trust?)
The process for funding a trust varies depending on the type of asset. Banks and other financial institutions require you retitle the accounts with them.
Here’s an example:
Before putting it in my trust, my bank account statement would be in the name of Ruth Fortune.
After placing it in my trust, the statement would be in the name of Ruth Fortune, Trustee of the Ruth Fortune Revocable Trust dated February 28, 2020.
For real estate, the deed is the document that reflects who owns the property. In order to fund your trust with real estate, the deed needs to be prepared by an attorney to reflect the title change.
Many people take the wise step of creating a trust. But then they fail to fund it! We encourage you to consult with a Connecticut estate attorney to ensure you are funding your trust properly and that you’re getting the full benefit of the trust. Give us a call, we’d be happy to help.
Beneficiary Designations: Don’t Wait Any Longer
Funding a Trust: What Does That Mean?
Is Your Estate Plan Ready for the New Year? Reasons Why You May Need to Update It
Why Changing Beneficiaries is Important
Revocable Trusts vs. Irrevocable Trusts: What’s the Difference?
Trusts and the Probate Process: What You Should Know