What Assets to Put in a Living Trust?

By Phil M. Fowler

A living trust can provide significant advantages, including avoiding probate and minimizing taxes. But only certain types of property should be placed in trust. For example, income-producing real estate is a great candidate for trust property, while personal checking and savings accounts are generally not great choices for trust property.

Real Estate

Most types of real estate should go into your living trust. Often, though, married couples already have provided for the real estate in the event of either spouse's death. Most spouses hold the property as joint tenants, which means if one spouse dies, the other spouse takes full title to the property without going through probate. But placing the property in trust allows you to name additional beneficiaries just in case you and your spouse die at the same time. Additionally, holding income-producing real estate, like a rental property, in trust can provide significant tax savings if done correctly.

Personal Bank Accounts

You should probably not put personal banking accounts, such as checking and savings accounts that you frequently use, in your trust. Remember that any property placed in trust is no longer held in your name personally, so if you want to write a personal check, you cannot do that from a checking account held by your trust. Additionally, putting your bank accounts in the name of the trust makes it more inconvenient for you to access the money in your accounts on a regular basis.

Retirement Accounts

Like personal bank accounts, retirement accounts are also better left out of the trust. In fact, in many states, it is illegal to put a retirement account into trust, so if you want to do so, you need to check your state's laws. Instead of placing your retirement account in trust, you should just be sure you have the proper person designated as the beneficiary of the account in case you die. That way, the retirement account avoids probate just as it would if it were in your trust.

Cars and Other Property

Many state laws prohibit placing cars in trust, so again, if you want to do this, you need to make sure it is legal in your state. As a practical matter, you should probably not place cars in trust because of difficulties with insuring the automobile. Other property that should not go into trust includes cash, life insurance policies, and property that you buy and sell regularly.

Business Interests

A great piece of property to place in trust is a business interest, particularly a small business interest that you own. If you own a portion of a small business and you simply pass that interest through your will, the details of your business will become public during the probate process. You probably don't want that to happen. To keep things private, you should instead put the business interest in your trust. Stocks and securities are also good ideas for a trust

Investment Accounts

Money market, bank accounts and other non-retirement investment accounts are good to place in trust. This allows you to specify in greater detail what happens to the money, beyond what you can specify with a pay-on-death designation provided by your bank.

Other Valuable Property

If you have physical property, such as family jewels or gold, that you want to pass by trust (mostly to avoid the public display of such property should it go through probate) then you should consider placing that property in trust. To do this, you simply list the item of property on the Trust Schedule.