When assets are transferred to a revocable trust, the purpose is generally to avoid the time and expense of the probate process. The total of your assets, all that you own in your name upon your death, are typically required to go through the probate process. The objective of the trust is to transfer ownership of your assets into the trust, so that they can escape the probate process. But, when transferring property into trust, how do you decide which property should be transferred?
Which assets should I transfer?
When you create a trust, you get to choose which of your assets will be transferred to the trust, and which, if any, will be excluded. Some people transfer everything they own to their trust, while others transfer just the majority of their assets, but leave certain property out. The items that you may decide to leave out, can be handled with a “pour over” will. Determining what to include in the trust and what to leave out, can be a task. However, the most common assets transferred into a living trust include some of the following:
- Houses and other real estate
- Bank Accounts (other than checking accounts)
- Campers, boats and expensive or rare automobiles
- Expensive Jewelry, antiques and valuable furniture
- Stocks, bonds, mutual funds and other securities
- Small business interests
- Precious metals such as gold and silver
- Valuable collections, such as rare coins, stamps and artwork
These so-called “big ticket” items are most commonly included. On the other hand, some types of property are too cumbersome to keep in a trust. For instance, vehicles that you use regularly, may be something you do not include in your trust. Although they do not pose a legal problem, there may be a practical problem, as the vehicle registration and insurance would need to be in your trustee’s name. Some financial lenders and insurance companies are confused by such legal arrangements. It is also important to point out that a retirement account or 401(k) cannot be assigned to a trust. However, you can name the trust as a beneficiary. Though, since everything you own need not be placed into the trust, what happens to property that is left out?
What happens to assets not included in your trust?
At your death, any property that has not been transferred into the name of your trust, must go through probate. If you have any property located out-of-state, it must go through a separate probate process, referred to as “ancillary” probate, if it has been excluded from your trust. Essentially, the importance of properly funding your trust must not be overlooked. Otherwise, your estate plan may not be as valuable to your family as you may have anticipated and your trust will be virtually useless.
If you have questions regarding funding trusts, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.