Building a secure future for your loved ones often involves a revocable living trust. What can you put in a trust? This guide explores the various assets you can place in a revocable living trust in Texas. It helps you make informed decisions for your estate plan. A living trust can be a powerful tool for wealth planning, and selecting assets depends on your case and legal considerations.
Understanding Revocable Living Trusts
A revocable living trust is a legal agreement where the grantor transfers ownership of assets to a trust. The trust document outlines the terms and conditions, ensuring clarity and enforceability. You maintain control and can change the trust during your life. This differs from an irrevocable trust, where the terms are generally fixed.
Upon your passing, the assets in the trust are distributed to your beneficiaries, avoiding probate court. This process helps assets pass to heirs and minimizes the involvement of court.
What Can You Put in a Trust in Texas?
Most assets can be placed within a revocable living trust, which is created by the settlor. This offers privacy and streamlines the distribution to heirs.
It’s important to ensure the name of the trust is recorded to avoid confusion during asset transfer. This offers privacy and streamlines the distribution to heirs.
It also bypasses the sometimes complicated probate process. Here’s a closer look at common includable items. These factors make revocable trusts a great tool for efficient estate planning.
Real Estate
Texas real estate, including your home and vacation homes, can be transferred to your revocable living trust. This includes property with an existing mortgage.
Consult a qualified Texas attorney for the property deed transfer. They can ensure proper handling if a lender won’t approve immediate retitling. This helps avoid any potential probate litigation.
Financial Accounts
Various financial accounts are transferable to a Texas revocable trust, allowing you to designate beneficiaries. Examples of these accounts include:
- Checking accounts.
- Savings accounts.
- Money market accounts.
- Certificates of Deposit (CDs). Be aware of early withdrawal penalties, as Kiplinger mentions.
- Brokerage accounts containing stocks, bonds, and mutual funds.
Retitling requires updated account paperwork with financial institutions. Transferring assets involves changing ownership on record, including retitling accounts. You can also name the document as the beneficiary for life insurance policies and other financial instruments like stocks. For certain assets like stock certificates, the process may require involvement from a stock transfer agent.
Life Insurance and Annuities
You may not always be able to directly transfer full ownership of insurance policies and annuities. However, these typically have named beneficiaries.
Designating your trust or its beneficiaries lets assets pass according to trust terms. The trust, as beneficiary, brings assets under your control and helps avoid probate. Insurance proceeds may contribute towards your estate’s value for estate tax purposes, especially if the amount exceeds the IRS threshold. Keep these tax implications in mind as you make your decisions.
Personal Property
A Texas trust can hold valuables, vehicles, jewelry, furniture, and digital assets. This includes items like cryptocurrency and artwork.
Items lacking ownership certificates may need additional documentation, like including boats in a revocable living trust. For example, a collectible boat might hold value. Create a detailed list and keep it with trust paperwork. Make sure associated insurance policies reflect these arrangements.
Business Interests
Sole proprietors can include their business assets. It’s important to designate a successor trustee for smooth management and transition of business assets. Partnership or LLC ownership can also be included.
However, partnership agreements or LLC operating agreements might restrict transfers. Verify your agreements beforehand. The specifics of business assets should be clarified within the operating agreement.
What Can You Not Put in a Revocable Trust?
Some assets aren’t placed in a Texas revocable living trust. These need separate arrangements to ensure proper management and ensure that all beneficiaries receive their intended portions.
- Retirement Accounts:
401(k)s, IRAs, and similar accounts are not held directly in a trust. However, you can name your trust as beneficiary to avoid required minimum distribution issues. Incorrect setup could trigger faster liquidation than an individual IRA. Passing retirement accounts smoothly is a common desire.
- Health Savings and Medical Savings Accounts (HSAs/MSAs):
These accounts are for medical costs. While they offer tax advantages, they are not transferable. They often permit beneficiary designations, so assets can pass easily to the family members. This enables effective estate administration while keeping assets out of probate. Consult a lawyer experienced in elder law for advice on handling HSAs and MSAs.
- Uniform Gifts/Transfers to Minors Accounts (UGMA/UTMA):
These accounts benefit minors. Adding successor custodians is usually preferred over placing them in a revocable trust. This avoids potential probate issues if the trustee dies before the beneficiary. It helps manage any legal title complexities associated with these accounts.
Things to Remember When Using a Living Trust
When considering what to place in a Texas trust, keep in mind these points:
Tax Implications
Placing assets into a revocable living trust doesn’t usually change their tax treatment during your life. However, there may be an exemption for certain assets, which could affect how taxes are applied. You still pay income tax on trust earnings and file taxes for the trust.
A Texas estate planning attorney can clarify specific rules and help manage your assets effectively to maximize tax benefits. This allows you to prepare adequately for potential taxable situations arising from different asset classes. Your tax considerations play a crucial role in planning.
Creditor Protection
Assets in a revocable trust remain accessible to creditors during your lifetime. Upon your death, they become part of the revocable trust and are distributed according to your wishes. This helps streamline estate administration.
Cost and Complexity
Establishing a trust has costs, and it can be time-consuming, especially when updates or amendments are required. You’ll need legal help, particularly for complex changes. A planning attorney is invaluable. Be sure to factor this into your budget and ensure all the necessary paperwork is completed.
Other Trust Considerations
Advanced Trust Planning
Trust planning often includes extra legal strategies. Consult an elder law attorney for advice. They can help with asset protection for issues like bankruptcy or creditor lawsuits. Planning may also include qualified charitable distributions (QCDs) from IRAs.
Asset Protection and Privacy
Texas law helps balance trust benefits with financial management. A living trust and estate plan can protect assets and offer privacy. Unlike wills, trusts keep assets private for you and your heirs.
Trusts control what inheritance details become public. They also simplify inheritance and reduce scrutiny. This privacy is helpful during probate or divorce.
Planning for Disability or Incapacity
Planning ahead ensures assets can support loved ones if you face disability or incapacity. Special needs trusts protect care while keeping benefits safe. Include medical directives and power of attorney in your estate plan for clear health care decisions.
Involving a Texas Lawyer
Every estate plan is unique. Understanding the types of trusts available, such as revocable and irrevocable can help you tailor your estate plan. A Texas lawyer can help decide if a revocable or irrevocable trust fits your needs. They ensure your plan follows state laws.
A lawyer can also show how your trust affects retirement and finances. This includes probate, social security, Roth IRAs, or business assets like LLCs and loans.
FAQs About What Can You Put in a Trust
What assets typically go into a trust?
Common trust assets include real estate, bank accounts, investment accounts, life insurance benefits, personal belongings, and some business interests. These assets are carefully managed according to your wishes, providing flexibility and control over how your wealth is distributed after you’re gone. Think about these components as building blocks to create a robust plan tailored to your specific circumstances. With trusts, you retain more direct influence on how these resources are used.
What cannot be held in a trust?
Retirement accounts (401ks, IRAs), health savings accounts, and UGMA/UTMA accounts usually can’t be placed directly in a trust. However, their beneficiary designations may direct assets to the trust. Be aware of any tax implications associated with each type of asset.
What is usually put in a trust?
Trusts typically hold real property, money, and tangible valuables. This includes brokerage accounts, savings, CDs, and vehicles. Regularly review account paperwork to ensure proper handling. These assets are crucial to many estate plans and provide peace of mind for future generations.
Should I put my bank accounts in a trust?
A Texas revocable living trust can help avoid probate. However, transferring accounts requires updates and may have tax consequences. A Texas attorney can guide you through these decisions and ensure your estate plan reflects your needs.
Consult a Texas lawyer to clarify the complexities of trusts and last will.
Conclusion
Determining what to put in a trust in Texas depends on your financial goals, property types, and estate size. All play a role in choosing the ideal asset mix.
While this provides general information, qualified legal advice tailored to your situation is crucial. Speaking with a Texas estate planning attorney helps achieve your objectives. It can bring peace of mind, ensuring a smooth transition and minimizing headaches for your loved ones.
Our experienced estate planning attorneys in Texas are ready to help you create an estate plan that meets your needs and goals. During a free consultation, we can discuss your situation and explore your options. Call us at (888) 584-9614 or contact us online to start planning your estate today.
