Most valuable assets can potentially be placed into a living trust, including a home, bank accounts, investment accounts, business interests, and many other types of property. However, some assets—particularly retirement accounts and annuities—are generally not retitled into a living trust because doing so may create negative income tax consequences.
Creating the trust document is therefore only one part of the estate planning process. Your assets must also be properly coordinated with the trust for the plan to work as intended.
Table of Contents
- What Does It Mean to Fund a Living Trust?
- Can You Put Your Home Into a Living Trust?
- Can Bank and Investment Accounts Go Into a Trust?
- Can Business Interests Be Put Into a Living Trust?
- Should Retirement Accounts Be Retitled Into a Living Trust?
- What About Annuities?
- Can Personal Property Be Transferred Into a Trust?
- Do Cars Have to Be Put Into a Living Trust?
- A Living Trust Only Works When Your Assets Work With It
What Does It Mean to Fund a Living Trust?
Funding a trust means transferring or coordinating assets so they are properly controlled by your estate plan.
For a titled asset, this may require changing the legal ownership of the property into the name of the trust. Other assets may be coordinated through beneficiary designations or other estate planning documents.
A living trust that has never been properly funded may not accomplish one of its most important purposes: keeping applicable assets out of probate. Learn more about how to fund a California trust.
Can You Put Your Home Into a Living Trust?
Yes. A home is one of the most common and valuable assets placed into a living trust.
Real estate must be properly titled so the trust owns the property. This is particularly important in California, where real estate passing outside a properly funded trust can create significant probate concerns.
Can Bank and Investment Accounts Go Into a Trust?
Many bank accounts and non-retirement investment accounts can be titled in the name of a living trust.
The appropriate method depends on the financial institution and type of account, so trust owners should make sure the ownership information and account records properly reflect their estate planning strategy.
Can Business Interests Be Put Into a Living Trust?
Many types of business interests can also be incorporated into a living trust plan. The specific steps will depend on the type of business entity, ownership documents, and any restrictions that apply to transferring the ownership interest.
Business owners should therefore coordinate trust funding with the legal documents governing the business rather than assuming the estate planning documents alone complete the transfer.
Should Retirement Accounts Be Retitled Into a Living Trust?
Generally, retirement accounts are not retitled into a living trust because transferring ownership can create unfavorable income tax consequences.
Instead, retirement accounts can be coordinated with the overall estate plan through carefully selected beneficiary designations.
The beneficiary designation itself can significantly affect how an asset passes after death. Learn more about how beneficiary designations can help or hurt an estate plan.
What About Annuities?
Like retirement accounts, annuities generally require special consideration before changing ownership. They may instead be coordinated with the estate plan through beneficiary designations or other appropriate planning strategies.
Because the tax treatment and contractual terms of financial products can differ, an asset should not be retitled simply because a living trust has been created.
Can Personal Property Be Transferred Into a Trust?
Yes. Household furnishings, jewelry, collectibles, and other personal property may not have formal certificates of title, but they can still be transferred into a living trust.
One method is a general assignment, which can be used to assign appropriate personal property to the trust.
Do Cars Have to Be Put Into a Living Trust?
Not necessarily. In many states, motor vehicles receive special treatment that may allow them to transfer without probate, making formal transfer into a living trust unnecessary in some circumstances.
Because vehicle and probate rules vary, your estate plan should determine whether transferring a particular vehicle is necessary rather than automatically retitling every asset you own.
A Living Trust Only Works When Your Assets Work With It
One of the most common estate planning mistakes is assuming that signing a trust completes the process. Proper trust funding and beneficiary coordination are essential to making sure the estate plan works as intended.
If you are creating or reviewing a living trust, learn more about California estate planning with Kavesh, Minor & Otis. A properly coordinated plan can help reduce the likelihood that assets unintentionally end up in probate or pass in a way that conflicts with your overall goals.