What goes into my trust?

Once you understand the purpose of a trust, the next logical question is what can I (or what should I) put inside of it?

For most clients, the first thing to put into your trust is your real estate - your primary residence, vacation homes, rental properties, and any other land you may own. To be clear, I’m oversimplifying this slightly because in reality you may have several different types of trusts or entities involved depending on how complex your real estate holdings are, but at the end of the day all of it should ultimately be tied into a trust.

The next asset to tackle are your financial accounts - checkings, savings, non-retirement or non-qualified investment accounts and annuities (assuming the annuity / CDs allows it). This is generally known as a “re-titling” of accounts and will show you, as trustee of your trust, being the new owner of the accounts.

However, many of my younger clients (or at least the ones on the younger side) may tend to simply update the pay on death POD or transfer on death TOD designation on these accounts to be their trust because it may be a simpler, less time consuming process (re-titling at certain banks may require new account numbers/checks/cards which some clients don’t want to do deal with). 

Unless your above the estate tax threshold, this generally works okay as long as you make sure the beneficiary is updated correctly and that the accounts ownership structure doesn’t inadvertently disrupt your estate plan - for example, I had a client that made the trust the pay on death beneficiary but the account was set up as jointly held with right of survivorship to one of the children - which means that the account would have shifted ownership completely to the child upon the clients death rather than the trust - which wasn’t the client’s intention (they just didn’t realize the implications of having a joint with right of survivorship account and the fact that the ownership structure would be considered before looking at the POD beneficiary).

With respect to life insurance, it’s generally the same idea - updating the death beneficiary designation to be your trust is generally fine - however, if you have an irrevocable trust (for example, an irrevocable life insurance trust also known as an ILIT) then you will want the life insurance policy to actually be owned by the trust to avoid inclusion in your estate for estate tax purposes.

Retirement accounts are an exception to the rule. You can’t place a retirement account inside. Your trust while you are living. Check with your attorney before doing anything, but most clients will keep their spouse as the primary death beneficiary on the account, and then name their trust (or their adult children) as the contingent beneficiary depending on the income tax implications and client preferences.

Business ownership interests, whether you have a single member LLC, partnership, or other privately held company, should also be transferred to your trust - most attorneys will draft an assignment of interest or shares to the trust at your signing.

Vehicles will vary by state. This is still a head scratcher for me, but for whatever reason (I think it’s because of how car insurance works differently in different states) certain states allow you to transfer your vehicle to trust (assuming it’s paid off) with no problems whereas other states make it a headache. For example, in New Hampshire clients generally place their vehicles in trust whereas in Massachusetts that is not that case (fortunately Massachusetts has a voluntary probate administration procedure that makes this a non-issue if the rest of your estate plan is set up correctly).

For other tangible personal property, like your furniture, artworks, jewelry, tools/collections, religious items, etc. you generally will just have your attorney do a 1 page assignment of ownership into you trust - in our firm, the common practice is to just include that assignment on schedule A of your trust document.

If you have additional questions or concerns, or would like me to review or create a trust for you, then click the link below to schedule a call with me today.

I’m always happy to help!