What can’t you put in a living trust?

A revocable living trust is one of several estate planning options that are available to you. This type of trust allows you to manage and protect your assets as you, the grantor, or owner, ages. “Revocable” means that you can amend or even revoke the trust during your lifetime. 

All of the assets placed into the trust make up the trust fund. The principal of the trust can change during the lifetime of the grantor due to appreciation or depreciation of assets as well as any expenses that are needed to maintain the trust.  

Upon creating a revocable living trust, you will need to name a representative called a “successor trustee” who will manage the trust if you should become mentally incapacitated or when you die. This provides for the protection of the assets and other property contained in the trust. In addition, you’ll also need to designate the person or persons benefiting from the trust upon your death. These are your beneficiaries and are usually members of your family, but can be a charity or other persons of your choosing.

There are advantages to setting up a revocable living trust. It allows your beneficiaries to avoid probate court which can be time-consuming and costly. In addition, having a living trust allows for a faster transfer of assets to your beneficiaries, and those assets will be distributed in private.

So, what can and what can’t go in a living trust? While there are a lot of assets that can be used to fund a living trust, there are some assets you shouldn’t put in a living trust.

The list

Assets that should not be used to fund your living trust include:

  • Qualified retirement accounts – 401ks, IRAs, 403(b)s, qualified annuities
  • Health saving accounts (HSAs) 
  • Medical saving accounts (MSAs) 
  • Uniform Transfers to Minors (UTMAs)
  • Uniform Gifts to Minors (UGMAs)
  • Life insurance
  • Motor vehicles

However, if you have minor children, you may want to include these assets in the distribution of your trust. 

You should always seek the advice of an experienced estate planning attorney to make sure that you understand how to handle these types of assets in order to prevent potential problems down the road and to make sure that your assets are distributed per your wishes.

What can go in your living trust?

Even if you have established a revocable living trust, what happens to property not in the trust when you die? Having a pour-over will take care of any assets or property that you may have forgotten to include in your trust. However, these assets are subject to probate.

If you have questions about setting up a living trust in California, what to put in your living trust, or creating a pour-over will, you should consult a professional who is well-versed in estate planning. At the Law Office of David W. Foley, located in San Diego, we specialize in creating revocable living trusts as part of an estate plan for our clients.

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