5 Types of Assets You Don’t Want in a Revocable Living Trust

5 Types of Assets You Don’t Want in a Revocable Living Trust

Revocable Living Trusts – also referred to simply as “Living Trusts” – are estate planning documents that determine who receives your property when you die, much like a will. They are referred to as “revocable” because they can be altered as your situations and desires change over time.

Living trusts have advantages over wills in certain circumstances – they are more private, and they reduce the chance of legal dispute over estates or probate. In any situation, consulting an experienced and knowledgeable estate planning attorney can help you decide whether this is the right choice for you.

If you have just created a Revocable Living Trust, or if you are considering one, you are no doubt curious about the types of assets that can fund your new account. While many of your assets can be retitled into the name of your trust, it’s important to know which of those cannot. That way, when you are planning your estate, you may take additional steps to protect these assets.

Some of these assets on the list cannot be retitled, while others should not be due to applicable state laws.

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  1. Qualified Retirement Accounts. Some examples of these types of accounts are 401(k)s, 403(b)s, qualified annuities, and IRAs. These types of accounts should not be retitled in the name of your Revocable Living Trust. If they are, they will be considered a complete withdrawal of funds from your account – which means 100% of the value will be subject to income tax for the year of the transfer. As an alternative, you can name your trust as the primary or secondary beneficiary of your account. A knowledgeable Florida estate planning attorney is useful for determining who should be the beneficiary for your specific situation.
  2. UTMA or UGMA Accounts. Uniform Transfers to Minor Accounts or Uniform Gifts to Minor Accounts are established for the benefit of a child, and thus the child is designated as the owner of the account. UTMA and UGMA accounts are not in the name of the custodian or the person who set up the account. Instead of changing the name of the owner of the account, a successor custodian should be established. This helps avoid probate if the original owner of the account dies before the child becomes a full adult.
  3. Health Savings and Medical Savings Accounts. These types of accounts cannot be retitled in the name of your trust. Instead, you may decide to instead designate the trust as the primary or secondary beneficiary of these accounts.
  4. Life Insurance. Those seeking to reassign ownership of a life insurance account should first consult with a Florida estate planning lawyer. While the ownership can be changed without a negative effect on the beneficiary, Revocable Living Trusts are not a protected individual for creditor protection purposes.
  5. Motor Vehicles. This includes cars, trucks, motorcycles, boats, scooters, and airplanes. In general, motor vehicles can be retitled so that they are owned by your trust. However, certain states view this type of transfer as a “sale” and charge a transfer tax for issuing a new title bearing the name of the trust – you need to check with the DMV first. One option to consider is waiting and purchasing the new vehicle in the name of the trust. Remember, Florida does not allow “transfer-on-death registration” of automobiles. Again, consult with an estate planning attorney to choose the best option for your specific situation.


About the Author:

Christopher Q. Wintter is the founder of Wintter & Associates, P.A. and a board-certified expert in Trust and Estate matters by the Florida Bar. With more than 24 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers for 2011 and 2012 in Estate and Trust Litigation.