-Creating a revocable trust is a strategic way to manage and protect your assets during your lifetime and beyond. When funding your revocable trust, it’s crucial to understand which assets are best suited for inclusion and which should remain outside the trust.
Assets To include
Below are some assets commonly held in a revocable trust and how to include them effectively.
- Real Estate
- Financial Accounts
- Investment Accounts
- Life Insurance Policies
Real estate is a valuable asset that often forms a significant part of an estate. By placing real estate in a trust, you can avoid probate, streamline the transfer process, and ensure your property is managed according to your wishes. To effectively include real estate, you must execute a new deed transferring ownership from your name to the trust’s name and file this deed with the local county recorder’s office.
Including financial accounts such as bank accounts, savings accounts, and certificates of deposit in a revocable trust can simplify access and management while avoiding probate. This ensures that funds are readily available to your beneficiaries and can be managed seamlessly. Contact your bank to retitle the accounts in the trust’s name, maintaining your check-writing and withdrawal rights.
Investment accounts, including brokerage accounts, mutual funds, and individual stocks, should be included in a revocable trust to facilitate management and ensure proper distribution upon death. This inclusion helps bypass probate and allows your investments to be managed according to your estate plan. Work with your financial advisor or broker to change the trust’s ownership.
Placing these policies in a revocable trust can provide liquidity for your estate, covering taxes and expenses and ensuring your beneficiaries receive the intended benefits. Including these policies in the trust can also simplify the distribution process and provide clear instructions for the trustee. Contact your insurance company to change the trust’s ownership and beneficiary designation.
Assets You Shouldn’t Include
The following types of assets are generally not recommended for inclusion in a revocable trust.
- Retirement Accounts
- Vehicles
- Everyday Checking Accounts
Due to tax implications, retirement accounts are generally unsuitable for inclusion in a revocable trust. Transferring these accounts into a trust can trigger immediate tax liabilities, negating the tax-deferred benefits they offer. Instead of including them in the trust, designate your trust as the beneficiary to ensure the funds are managed according to your estate plan without incurring unnecessary taxes.
Vehicles typically should not be included in a revocable trust because they depreciate quickly and are easily transferable through other means. Placing vehicles in a trust can be cumbersome and may not provide significant benefits compared to their administrative hassle. Instead, use a transfer-on-death designation to allow your vehicle to pass directly to your intended beneficiary without going through probate.
Everyday checking accounts used for daily expenses and transactions should generally remain outside of a revocable trust. Including these accounts can complicate your routine financial management and create unnecessary administrative burdens for you and your trustee. Instead, keep these accounts in your name to maintain easy access and control while using other estate planning tools for larger financial assets.
When the time comes to create a revocable trust, you should get it right. You can trust Forms Legal to provide the correct templates that you can fill in online, download, and print when done.