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3 assets that you shouldn’t include in a revocable trust

On Behalf of | Feb 13, 2023 | Estate Planning

As you get older, you need to save for retirement and have a financial plan to allow you to live comfortably during your golden years. You’ll also need a strategy in place to enable you to pass on your assets to your beneficiaries.

A revocable or living trust will enable you to protect your assets, maintain control over them during your lifetime and pass them over to your heirs without having to go through probate. Unfortunately, not all assets can go through a revocable trust.

Here are some assets that can’t go into one:

Motor vehicles

If you owe some money on your car, your lender may not allow you to transfer your vehicle to the trust. However, even if you own your vehicle, you may have to pay a retitling fee and taxes to get a title in the name of the trust. This is because you and the trust are legal entities. What’s more, the trust will be responsible if your car is involved in an accident, which may expose all other assets to liability claims.

Retirement accounts

You should not transfer retirement accounts, including 401(k) s, IRAs and other annuities, into the living trust. Transferring such accounts may be seen as withdrawing the funds, and income taxes would be imposed. However, you can avoid such a scenario by naming the trust as the beneficiary of the retirement account.

Medical savings account

Your medical and health savings accounts are tax-free and come in handy when paying for medical expenses. However, these accounts cannot be named under a revocable trust. If you need to tie these accounts to your trust, you can name the trust as your beneficiary.

While there are several assets that you can use to fund a living trust, there are some that you shouldn’t include. Therefore, consider seeking legal assistance when setting up your revocable living trust in Texas and have questions about what to put and not to put in the trust.

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