If you’ve created a trust as part of your estate plan, you have taken a crucial step in protecting your assets and providing for those you love the most when you are no longer around to do so. Trusts are a great legal tool that ensure assets pass smoothly to beneficiaries, and they often bypass the lengthy and costly probate process. It’s normal to think your estate is settled once the ink dries, but you are not finished yet.
You don’t need to use a trust for every asset you possess, which begs the question: What are the best assets to put in a trust? You should put several assets in a trust:
- Real Estate
- Financial Accounts
- Life Insurance
- Tangible Personal Property
- Collectible Vehicles
- Businesses
- Cryptocurrency
But there’s more to it than that, and it is normal to have more questions, such as what should you not put in a living trust, and how do you transfer property into a trust? Luckily, we are here to answer it all for you! So here is your guide to putting assets in a trust.
What Are the Best Assets to Put in a Trust?
When considering the best assets to put in a trust, it’s impossible to understate the peace of mind you will enjoy knowing your important assets are protected. But does that mean you should put all assets in a trust? Not exactly. So this begs the question: What are the best assets to put in a trust? Well, you’re in luck because we’re happy to help!
From putting real estate in a trust to putting property in a trust, here is what to know!
Related Article: The Benefits of Creating a Trust
Real Estate
If you are like many people, your home is likely one of your largest assets, and a trust can be especially helpful to transfer such real estate quickly. Putting real estate in a trust is one of the most common ways people use these legal arrangements.
If you own land, a house, or a commercial property, using a trust can also help avoid the hassle of separate probate proceedings for land, commercial properties, and homes owned out of state or held in different counties, which requires a separate type of probate called ancillary probate.
Still, remember that any property with a mortgage would require retitling into the name of the trust. Some lenders may be reluctant to do this.
Related Article: Maximizing Wealth Transfer: The Power of Trusts and Fiduciary Services
Financial Accounts
Financial accounts are some of the more complicated assets to consider when answering, What are the best assets to put in a trust? A trust can own several types of financial assets, such as:
- Bonds and stock certificates
- Other investment assets
- Shareholders stock from closely held corporations
- Non-retirement accounts
- Money market accounts, cash, and checking and savings accounts
- Annuities
- Certificates of Deposit (CDs) or Share Certificates, though you should keep in mind that retitling these accounts could potentially trigger early withdrawal penalties
- Safe-deposit boxes
Still, it’s important to understand that transferring these financial accounts into the trust to fund the trust can have different consequences or requirements, so working with a professional throughout this process is imperative.
Transferring financial accounts could make accessing these funds easier for your loved ones after you are gone.
Life Insurance
Life insurance is essential to taking care of your loved ones, and it is an invaluable inclusion when answering the question, What are the best assets to put in a trust? But it is important to understand some things.
Putting life insurance in a trust could be a great way to protect it from creditors and make it easier for your loved ones to access the money by avoiding probate.
Still, this could come with some risks. If you elect to be the trustee of your living trust, for example, all assets in the trust are considered your property, meaning life insurance proceeds will count as part of your estate’s worth.
As a result, it could create tax complications if you reach the IRS threshold for taxable estates. In 2023, the estate tax was $12.92 million for individuals and $25.84 million for married couples.
Tangible Personal Property
Tangible personal property is one of the most common answers to the question, What are the best assets to put in a trust?
Putting property in a trust is incredibly common, but this is usually reserved for valuable property such as china dishes, jewelry, art, collectibles, or furniture in a trust. One way people do this is with a pour-over will to transfer assets to their trust after they die.
In these situations, a pour-over will is often created and used with a trust. Assets that transfer during this process still go through the probate process. Most commonly, people simply assign tangible property to their trust.
Personal property without any legal certificate or title is commonly listed on an accompanying schedule with your trust documents. Those assets in the trust with certificates or legal titles often require the owner to quitclaim their ownership interest to the trust.
Collectible Vehicles
Now, it may surprise some people to see vehicles when seeing the answer to the question: What are the best assets to put in a trust? But collectible vehicles are an exception!
Some cars retain their cash value for long periods and don’t experience the same depreciation as the average car. Because of that, they may be worth transferring to your trust, though you should keep in mind that this could subject your trust to title transfers and taxes, so you should always speak to a trusted CPA and lawyer who specializes in these matters.
Businesses
If you’re a business owner, you may be specifically wondering about your business when asking, ‘What are the best assets to put in a trust?’
Transferring a business interest into a trust can yield several advantages, such as relieving your family of having to carry the burden of your business debts, creating a smooth and streamlined succession plan, and minimizing the tax burden on your estate.
Still, transferring a business can be considerably more complicated depending on your situation, the type of business in question, and your stake in the business, so it is crucial to work with an attorney to determine if this is the right option for you and your loved ones.
Related Article: Advantages of Trusts for Estate Planning
Cryptocurrency
The digital age means novel inclusions when answering, What are the best assets to put in a trust?
Putting cryptocurrency, like Bitcoin, in a trust is also a great way to use this legal arrangement. Cryptocurrency is an asset that could pay off big for your beneficiaries.
Still, managing this type of asset takes a unique set of skills, so you want to ensure the trustee entrusted with overseeing the trust either has this specialized skill set or will hire someone savvy in this niche financial field.
Still, cryptocurrency is new, so it is crucial to understand that trust and estate laws are still adapting to the introduction of this asset class. Because of this, working with an attorney is crucial to ensure everything is by the book.
Related Articles: What Assets Should I Include in My Trust?
What Should You Not Put in a Living Trust?
You likely have another question if you were wondering, What are the best assets to put in a trust? And that relates to what you should not put in a living trust. While this can be complicated, we are here to break it down for you. What should you not put in a living trust? Here’s what to know:
- Retirement Accounts
- Health Savings Accounts (HSAs) or Medical Savings Accounts
- Open Bank Accounts for Personal Use
- UGMA/UTMA Accounts
- Vehicles
Related Article: Who Should You Name as a Trustee? Why to Hire a Fiduciary!
Retirement Accounts
While you can transfer them to your trust, it is generally not recommended to transfer retirement accounts such as a 401(k), IRA, or 403(b) into your living trust. This would require withdrawal and trigger tax consequences, diminishing their overall value.
However, there is a way to circumvent these consequences. You can name the trust the primary or secondary beneficiary, ensuring that funds transfer to the trust upon your death. You can even provide instructions for dividing these funds after death.
Health Savings Accounts (HSAs) or Medical Savings Accounts
People use these accounts to set money aside for certain medical expenses, such as copays or deductibles. This money comes directly from your paycheck, so you don’t pay tax on it.
Since these accounts already allow you to use the money tax-free for permissible medical expenses, you cannot transfer them to a living trust. Similar to retirement accounts, however, you can name the trust as the primary or secondary beneficiary for these accounts.
This provides you more flexibility in how the funds are distributed after you pass on.
Open Bank Accounts for Personal Use
You typically should avoid transferring accounts you use to actively pay monthly bills unless you are the trustee and granted full control of these assets.
For most people, keeping these accounts out of the trust is easier. Still, many worry about keeping their bank separate from the trust because of the potential for lengthy probate and the inability to quickly transfer funds to heirs.
This is when adding primary and secondary beneficiaries could come in handy! Review your accounts for a payable-on-death (POD) option that allows you to add primary and secondary beneficiaries to ease that process.
As a side note, remember that you can’t place physical cash into your trust, but you can put money in a bank account and then transfer that account into a trust.
UGMA/UTMA Accounts
People create Uniform Gifts or Transfers to Minors Accounts, or UTMA accounts, to benefit minor children. Because a trust could potentially be pulled into probate if the trustee were to die before the minor, consider utilizing a successor custodian on these accounts.
Vehicles
Determining whether or not you should include vehicles in your trust can be tricky. Usually, people do not place everyday vehicles like cars, boats, trucks, motorcycles, airplanes, or even mules or snowmobiles in a trust.
One reason is that insurance and registration companies may not be familiar with trust ownership. Another reason is that they often avoid probate, and unlike collectible vehicles, are not appreciable assets.
Generally, because people buy and sell most vehicles fairly regularly, it’s probably not worth the extra paperwork and hassle of re-titling your car in the name of your trust if you plan on selling or gifting it to someone.
How Do You Transfer Property into a Trust?
Now, it’s important to understand how to transfer property into a trust after answering the question: What are the best assets to put in a trust? Ultimately, this depends on the type of property you are putting into the trust. For most assets, this process is relatively simple:
- Bank and brokerage accounts: These types of accounts usually require new account paperwork in the name of the trust and signed authorization to retitle or transfer the asset. It is, however, important to carefully evaluate the implications if they require regular withdrawals or activity.
- Real estate: With real estate, you must prepare, sign, and register a new deed for the property. If you have a loan or mortgage, speak with your lender, as this could require you to fill out additional paperwork to ensure your payments aren’t interrupted.
- Physical stock and bond certificates: These require a change of ownership to be completed with the stock transfer agent or bond issuer.
- Life insurance and annuity contracts: These usually necessitate submitting a change of ownership form to the contract issuer in which you give trust ownership, though you can also name your trust as the beneficiary of some policies, like life insurance.
- Annuities: While you can fund the trust with an annuity, these instruments already enjoy preferential tax treatment, and transferring them may surrender this benefit.
- Existing certificates of deposit: These certificate accounts are usually transferred to a trust by opening a new account. When considering this option, always speak with your issuer to determine if they will waive any penalties.
- Safe Deposit Boxes: One can issue safe deposit boxes to the trust or transfer ownership of an existing box.
Still, some assets could require more effort to properly change the title, though the help of a professional could significantly streamline this process:
- Personal property without legal certificate of title: Personal property is commonly listed on a schedule accompanying the trust to reflect that the trust owns those assets.
- Assets with certificates of legal title: This type of asset requires that the owner quitclaim ownership interest in the asset to the trust. The attorney who drafts the trust should help you with this process.
Related Article: Three Ways Trust Beneficiaries Receive Their Inheritance
Now You’ve Answered the Question, What Are the Best Assets to Put in a Trust? Get Professional Help Setting Up and Managing a Trust.
Creating a trust is setting up a vital line of protection for the people you love. However, transferring assets into the trust is just one part of the process. Setting up and overseeing a trust is a significant responsibility that poses unique complications. Not only are there specific rules governing the different assets you put in the trust, but you will also need guidance setting up and ensuring it’s legally valid. Your legacy and loved ones deserve a trusted professional with extensive expertise and experience managing it. Working with a professional is essential.
