What Assets Should Not be Included in a Living Trust?
A living trust is set up to benefit both you and your heirs throughout your and their lifetimes. It is designed to hold your assets safely within it and give you the power to organize it how you would like. A living trust helps to avoid probate and provide for a smooth transfer of assets after a person dies. Transferring assets into a trust can save years and thousands of dollars in legal fees. However, not all of your assets should be included in a living trust, for various reasons. We will go over those here.
First and foremost, any qualified retirement accounts you have, such as a 401K, or a 403K, or an IRA, should be kept out of the living trust. Transferring those retirement accounts into a living trust is treated as a complete withdrawal of your funds. One hundred percent of the account’s value would be subject to income tax in the year the transfer was made. To avoid this, you can change either the primary or the secondary beneficiaries of your account to your trust.
Health Saving and Medical Savings Accounts
Health savings and medical savings accounts should also not be included in your living trust. These accounts are tax-exempt, and cannot be retitled to the trust. However, the trust can be named as either the primary or the secondary beneficiary of the accounts.
Uniform Gifts to Minor Children
Uniform Gifts to minor children, as the name implies, are set up to benefit a child, and should not be included in a living trust. These are set up with the child as the sole owner of the account, as opposed to the person who is setting it up.
Vehicles can be tricky with a living trust, especially if it is not adding a lot of value to the trust. If you were to get into a car accident, and the other party sees that the car is in a trust, they may feel more inclined to sue, based on the belief that there is more money to be had.
If you do set up a living trust, you still need a will. These are called a pour-over will, and it allows you to direct that any assets titled solely in your name are transferred to your trust after your death. This covers any accounts or property that you might have neglected to include in the trust. However, these assets are subject to probate, unlike assets already owned by the living trust when you pass away.
Contact Our Asset Protection Attorneys at The Mattar Firm
When making these decisions, consulting with our experienced asset protection attorneys at The Mattar Firm may be the best option, as we have the knowledge and skills to lead you in the right direction when it comes to what should and should not go into your living trust. These are your assets and find the best path forward for the benefits you and your family. Contact us today at 239-222-2222 or 844-444-4444.