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What Property Can Go Into a Living Trust?

What Property Can Go Into a Living Trust

A trust is a deal in which one or more people manage or take care of property for someone else’s benefit. It is created during your lifetime and in the case of a living trust, it is something that is a part of Estate Planning Law. This means that while you are still alive, you transfer title to your property from your name to that of the trustee of the living trust. Now, you can be that trustee initially. That’s not a problem. But legal title does change. You can use the trust to hoard your property under one document, so that the assets is distributed smoothly after your death.

A living trust basically helps peoples to maintain efficient control over their assets and their wishes carried after they die. A living trust can help save the expense and delay of probate, which can last as long as three years and take up to 10-to-15% of an individual’s estate’s value. As you don’t need to register a trust with the courts, setting one up can also provide you with more privacy than a will. You sign the agreement and it becomes an enforceable document.

Your living trust can be revocable or irrevocable.

A revocable trust can be revoked or amended by you when needed at anytime when you needed. This type is fairly flexible in its structure. If you’re searching for an estate (an extensive area of land in the country, usually with a large house, owned by one person, family, or organization.) planning vehicle which offers privacy advantages control over assets and privacy advantages then a revocable trust is a good place from where you can start.
An irrevocable trust cannot be changed or revoked by you once it is signed. Because an irrevocable trust cannot be changed, so you want to be much cautious to understand its terms and conditions. A good candidate for an irrevocable trust is a doctor or surgeon who is at risk of malpractice and could be sued (ask a person to give something in the place of hurting or treating unfairly to someone) in a court of law. In that scenario, an irrevocable trust provides a shelter against such lawsuits, and provides ideal asset protection. Most of people will start with a revocable trust, so they can easily change it when it is required.

Benefits of a Living Trust

You don’t want a judge for deciding who will get your assets when you’re gone. A living trust will give you the right to distribute your assets, according to your own will.
Probate (the official proving of a will) costs can be significant, so living trust help you in avoiding the courts.
A living trust takes away any fear over how your estate will be handled after you’re gone. A living trust provides clear direction on how your assets will be distributed.
One big difference between the two legal documents is the level of privacy offered with a living trust. As a living trust is not made public, upon your death, your estate will be distributed in private. A will, on the hand, is public record and so all transactions will be public as well.
If you become ill or incapacitated, the person you have chosen as successor trustee can step in and manage your affairs without the intervention of a court. In this way, you can avoid a court-appointed conservatorship for your affairs.
Both a family trust and a living trust can help you achieve your estate planning goals, but which one is better for you depends on your needs—and actually, in most cases, the terms may be interchangeable. Which method is preferable depends on your situation, but often the goal of creating a family trust as a living trust is to transfer wealth to family members and remove assets from the grantor’s legal ownership, while still allowing her control over the trust property and the right to receive benefits from the assets as well.

What are the best assets to place in a trust?

If your goal is to transfer assets into an irrevocable trust in order to reduce your taxable estate, certain assets can be used to leverage your gift tax annual exclusion. In other words, if you place highly appreciating assets in trust, you will not only transfer the initial amount, but all future growth (income and appreciation as well). Thus, some assets are “better” than others when it comes to excluding the asset from your estate and maximizing the amount that will pass tax-free to beneficiaries. For instance, if you place a certificate of deposit in trust, it may grow at a rate of 3% per year.

However, if you place real estate in trust, it may grow at a rate of 6% per year. In five years, there may be a significant difference between what you retained in your estate and what has grown in the trust. Now, if you were renting the real estate, the additional net income grows in the trust and you have enhanced the initial transfer even further. Moreover, suppose you have a life insurance policy with a current value of $10,000 and a death benefit of $1 million. If you place the policy in trust, you have turned your $10,000 transfer into a $1 million tax-free benefit for your beneficiaries. The benefit of transferring life insurance policies is more fully explained below.

Non qualified annuity

Non qualified annuity is funded with after-tax dollars, meaning you have already paid taxes on the money before it goes into the annuity .These can be re-titled into the name of your Revocable Living Trust, and your trust can also be designated as the primary or secondary beneficiary of the annuity.

Personal Property

This includes personal effects (jewelry, clothing, books, personal papers, personal computers); household goods (furniture and furnishings, antiques, collectibles, artwork); motor vehicles (cars, trucks, boats, scooters, airplanes); firearms; pets, horses and cattle; tools; and photos and the like. Note that in some states a motor vehicle titled in an individual’s name can be transferred without probate.

Value able items and collections

Some people are in habit of collecting the valuable things such as precious metals, work of arts, stamp, furniture, antiques and coins. It may be anything that is transferred into the trust to avoid the probate and disbursed to the rightful beneficiary

Bank account

The bank account can also be put into the trust. You have to make sure about the paperwork that is needed to show that your account is owned by the trust. If you don’t want to use a trust to avoid probate then you may be able to add payable on the death beneficiary.

Life Insurance Policy

Why would you want to change the owner of your life insurance policy to the Trustee of your Revocable Living Trust? Because if you become mentally incapacitated, then your Disability Trustee will have the legal authority to deal with policy, including borrowing against the cash value of the policy to pay for your care.
If I transfer my life insurance policy to a trust, are the benefits immediate?
No. The insurance policy must be transferred to the trust at least three years before the insured’s death. This three year rule prevents people from giving away life insurance policies on their deathbeds and “cheating” the IRS out of the estate tax on the proceeds. The three year rule, however, only applies to gifts of policies, not sales of policies. To avoid the three year rule, many clients prefer to transfer cash to the trust and then have the trust purchase the policy from them. Because the trust is a grantor trust, there is no income tax consequence to this type of sale and the three year rule is effectively avoided.

Real estate

If you’re like most people, the most valuable thing you own is real estate: your house, condominium, or land. Many people create a living trust just to make sure a house doesn’t go through probate. You can probably save your family substantial probate costs by transferring your real estate through a living trust.
Placing real estate into a trust changes very little about it. The name on the title or deed may change to the name on the trust, but so long as you are the administrator of the trust, you can still deal with the real estate however you see fit, including buying and selling property. The only issue you may see with this is when refinancing a piece a property, a bank may require you to conduct business in your personal name and then transfer the property to your trust afterwards. Because your living trust is revocable, transferring real estate to your trust should not disturb your current mortgage, property taxes or current appraisal. Also, having your home in your trust will have no effect on your being able to use the capital gains tax exemption when you sell it. Finally, having your trust as the owner on your homeowner and title insurance policies may make it easier for a successor trustee to handle your affairs during lifetime incapacity or after your death.


There’s no way to transfer actual cash to a living trust. You can, however, transfer ownership of a cash account—savings account, money market account, or certificate of deposit, for example—to your living trust. You can then name a beneficiary to receive the contents of the account. So if you want to leave $5,000 to Cousin Fred, all you have to do is put the money in a bank account, transfer it to yourself as trustee, and name Fred in the trust document as the beneficiary.
If you don’t want to set up a separate account to leave a modest amount of cash to a beneficiary, think about buying a savings bond and designating a payable-on-death beneficiary, or leaving one larger account, through your trust, to several beneficiaries.
What Property does not go into a Living Trust?

Property of little value

This property may not need to go through probate or may be subject to a streamlined process.
Personal checking accounts: These accounts are usually not put into living trusts, since money goes in and out of them so frequently.
Property you buy or sell frequently: This is important if you do not expect to own the property when you die.
Cars: Most cars are not very valuable, and insurance companies may be reluctant to insure a car owned by a trust. If you do own a valuable car, talk to your insurance company about obtaining insurance on a trust-owned car. Generally speaking, motor vehicles can be re-titled into your trust—yes, cars, trucks, motorcycles, boats, scooters and even airplanes. However, some states take the stance that this transfer is a sale and charge a significant transfer tax for issuing a new title in the name of the trust. If this applies to your state, and then you may want to hold off and purchase your new vehicle in the name of the trust. Aside from this, in some states probate is not necessary to transfer ownership of a motor vehicle after the owner dies. Certain states now allow vehicle owners to designate a beneficiary after death. Check with your estate planning attorney to understand how to avoid probate of your vehicles in your state.
Qualified retirement account such as IRAs, 401(k) s, etc: Qualified retirement accounts, including 401(k) s, 403(b) s, IRAs, and qualified annuities, shouldn’t reside within your revocable living trust. The reason is the transfer would be treated as a complete withdrawal of funds from your account. Subsequently, 100 percent of the value would be subject to income tax in the year the transfer is made. What you should do is change the primary or secondary beneficiary of your account to your trust.
Life insurance: Life insurance proceeds are distributed according to your policy. The
Income or principal from another trust: If you are receiving payments or distributions from another person’s trust, you can’t put the property itself into your living trust. However, you can transfer your right to receive these items to your beneficiaries in your trust.

Living Trust Attorney Free Consultation

When you need legal help with a living trust, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506