When it comes to estate planning, a revocable trust is a great way to ensure that your assets are managed and distributed according to your wishes. However, there are certain assets that should not be placed in a revocable trust. Real estate, retirement accounts, and business interests are some of the assets that should not be placed in a revocable trust. Real estate can be placed in a living trust, even if you owe money for it.
A loan on the property, such as a mortgage or deed of trust, will follow the property to the trust and will also follow the property to the beneficiary. However, informing the lender about the transfer could reduce confusion in the future. If you are already co-owner of real estate with someone else, you may not need a living trust right now. Vintage cars and mobile homes that are permanently attached to land and are considered real estate under state law can also be transferred to your living trust.
However, “qualifying retirement plan assets” such as 401ks or IRAs should not be placed in the trust. Instead, they should be left to a person alive first. Any type of asset you own can be placed within the revocable living trust, with the exception of qualifying retirement plan assets. Living trusts have many potential advantages, such as avoiding probate and providing privacy.
You should always check with your bank before attempting to transfer an account or savings certificate. In addition, having a living trust allows for a faster transfer of assets to its beneficiaries, and those assets will be distributed privately. It is strongly recommended that you first consult your financial advisor or lawyer before using an irrevocable trust. If you have minor children, you may want to include these assets in your trust distribution. The person you name as trustee takes over your assets and acts according to the wishes you set in the trust.
Otherwise, when the time comes for successor trustees to act, they may have to go through a lengthy process or prove who they are and that they have the right to manage their assets. When assembling a trust, it is best to use it as the primary vehicle for all assets to flow through instead of going through probate court where they incur fees, delay and expenses. There are several advantages to transferring your business interest to a revocable living trust. The process may vary slightly according to state law, but essentially involves writing a trust document, signing it, and funding it by transferring assets to the trust. Another feature is that placing your assets in a trust will help protect them in case you become incapacitated. It's important to note that some partnership agreements may prohibit the transfer of assets to living trusts, so you'll want to consult a financial advisor or lawyer.