Not All Assets Are Trust-Worthy What to Exclude From Your Trust
Whenever clients start the Estate Planning process, we recommend they look into Trusts. A Trust allows you to transfer your assets to a trustee who will hold and manage them for the benefit of the beneficiaries. When utilized properly, a Trust can help you avoid probate, protect the estate’s privacy, have more control over distribution, minimize estate taxes, and more. However, you can’t put everything you own into a Trust. Specific rules apply, and you should never place certain assets in a Trust. Many people consider placing their retirement and health savings accounts into their Trust, but you should try to avoid this. Placing a retirement account into a Trust could count as cashing it out, which can lead to extra taxes and an added penalty for withdrawing early. For health or medical savings accounts, you generally cannot transfer them directly into a Living Trust. However, we have a workaround.
You could name the Trust as the primary or secondary beneficiary, allowing funds to flow into the Trust upon the account holder’s death.
You should also avoid placing foreign assets, cash, and vehicles into your Trust. Foreign assets may be subject to different laws and regulations than we see in the U.S., so, in most cases, you need to go through the Estate Planning process in the country that houses those assets. Cash is nearly impossible to track and manage within a Trust, but placing that money in a bank account is a solid workaround. While placing vehicles within a Trust is possible, it can be incredibly complex and expensive.
While these are the assets you want to avoid placing in your Trust, you can include a wide variety without any difficulty, such as real estate, bank accounts, investments, business interests, personal property, and intellectual property. If you have any questions about which assets to include in your Trust or need help creating an Estate Plan, call us today!
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