Not sure which assets you should transfer into a trust? There are some you can transfer (and should), while others could cost you when it comes to taxes and penalties.
Creating a trust is only half the battle. The most critical step to establishing a revocable trust is to fund that trust. Funding, in its simplest terms, means transferring assets from your name into the name of the trust – making the trust the owner of that asset.
A revocable living trust is the trust of choice for many families today. They break away from reliance on a will or joint ownership and save loved ones the cost and time of probate court. Furthermore, they allow beneficiaries to receive their inheritance faster.
Assets You Can and Cannot Put into Your Plainview, NY, Trust
Funding is a critical step to finalizing your trust. Once your assets are put into the trust, you are the trustee, and you control those assets. As the trustee, you buy and sell assets associated with the trust, and you do not need court approval.
The funding process sounds daunting, but it is not. One thing funding does require is time. You will need to fill out the documents allowing you to transfer ownership, and an estate planning attorney can help if you do not wish to do so yourself.
Not all assets can transfer into a revocable trust. Therefore, you need to understand what assets you can and cannot transfer, and ones that you should prioritize in case you are unable to move all of the assets in time.
Types of Assets You Cannot Put in a Revocable Trust
As stated before, not all assets can go into a trust. These assets are those that cannot be retitled, but you can still designate a beneficiary for them.
- Retirement Accounts – Your retirement account is yours, and you have funded it. But you cannot place it into your trust. Any retirement account, including a 401(k), IRA, and annuities should never be put into a trust. If you do, then the transfer of those assets will count as a withdrawal and 100 percent of the value is subject to income tax. To avoid such tax, name the trust as the beneficiary on your beneficiary designation.
- Health Savings Accounts or Medical Savings Accounts – If you contribute to an HSA, you may be unable to retitle that account. If you cannot, you can again name the trust as the primary or secondary beneficiary.
- Life Insurance Policies – Life insurance policies can be transferred into a trust, but ask your attorney before doing so. Sometimes it is better to use the trust as the primary or secondary beneficiary.
Types of Assets You Can and Should Put in a Revocable Trust
Other assets can and should be placed in your trust. These assets are quickly passed to your loved ones, and they avoid going through probate – a lengthy and costly process.
All these accounts should be your top priority. Because without them being in a trust, they could be subject to creditors. Many of these accounts will hold high value and may contain inheritances your beneficiaries need immediately. If they are subject to probate, then your family will need to wait for the probate process to complete itself.
- Cash Accounts – Cash accounts, including savings and checking accounts, money markets, and CDs should be placed into a trust. Check with your bank before transferring a CD. Some financial institutions consider a CD transfer a withdrawal, which means you could be penalized. If that is the case, name the trust as the primary or secondary beneficiary instead.
- Investment and Brokerage Accounts – Any investment account you have, including brokerage accounts in your name or joint accounts, should be transferred into your trust.
- Annuities – A non-qualified annuity can be transferred into the name of your Revocable Living Trust, and you can also name the trust as your primary or secondary beneficiary if you prefer.
- Stocks and Bonds – If you have stocks or bonds in certificate form, you can return those certificates to the transfer agent and receive a new certificate with the trust named as the owner. If you want to avoid the hassles of transfer, you can also deposit the certificates into a brokerage account and then transfer them that way.
- Personal Property – Tangible assets like jewelry, books, papers, household goods, and other personal property can be put into the trust.
- Businesses – If you have business interests such as stocks in a public corporation, you can transfer those into the estate. However, you must read all shareholder agreements to ensure you are complying. Also, review any partnership agreements and operating agreements to ensure you follow the rules of transfer.
- Unsecured Personal Loans – Any money owed to you may be transferred into the trust. If you have an unsecured personal loan out, the proceeds of that loan repayment can go directly into the trust.
- Royalties, Trademarks, Patents, and Copyrights – You will need to go through the federal guidelines to transfer any royalties from patents and copyrights into your trust.
- Oil, Mineral, or Gas Rights – If you have ownership of these rights, you may be able to transfer them or assign a new deed with the name of the trust listed.
- Real Estate – Any real estate you own can be transferred into the living trust. You will need to have a new deed recorded where the real estate is located. Therefore, if you have a vacation property, you must receive a deed in that vacation property’s city or state.
Concerned about Your Assets? Talk to an Estate Planning Attorney First
Identifying which assets you can and should transfer versus those you cannot requires an understanding of estate planning laws here in New York.
Instead of trying to decode the law, speak with an estate planning attorney who can help you identify the assets best suited for your estate plan and those where you would name the trust as the beneficiary instead of transferring.
Contact the Law Office of Andrew M. Lamkin, P.C. to explore your options at 516-605-0625 or request a free consultation online.