First, the main purpose of establishing a revocable trust is to avoid the time and expenses of probate. When you die, all of the assets you own, in only your name, will be required to go through the probate process. The objective of a trust is to transfer ownership of these assets to the trust, so as to avoid probate. With that in mind, the general idea is to transfer all of your assets into the trust. Otherwise, probate will still be required, at least for some property. Nevertheless, there may be certain assets that either should not or cannot be transferred to your trust. If you are wondering what should and should not be included in your trust this article will give you some ideas to consider.
Types of assets typically placed in trust
Some clients simply transfer everything they own into a trust. Some only transfer what are referred to as “big ticket” items. Deciding what to transfer can be difficult. Some common assets clients choose to transfer to their living trust include:
- Houses and other real estate
- Bank accounts (other than checking accounts)
- Campers, boats and expensive or rare automobiles
- Expensive jewelry, antiques and valuable furniture
- Stocks, bonds, mutual funds and other securities
- Small business interests
- Precious metals such as gold and silver
- Valuable collections, such as rare coins, stamps and artwork
Assets often excluded from living trusts
The truth is, certain types of property may be too troublesome to keep in trust. For example, the vehicle that you use on a regular basis probably should be left out of your trust because of the practical problems it will cause with vehicle registration and insurance for that vehicle.
If you have any real property that has been contaminated, transferring it to your trust could leave your trustee personally responsible for cleaning up the property. Examples of contaminated property may be a gas station with underground tanks or chemicals that may have been released on the property.
What happens to assets excluded from your trust?
Upon your death, the property that was not transferred to your trust will be required to go through the probate process. The same is true for property that is located out-of-state at the time of your death. That process is referred to as an ancillary probate proceeding.
How can I make changes to my trust?
There are basically two ways to change the terms of a revocable living trust. You can create an Amendment of your trust terms to include the changes you want to make. Your other option is to revoke the trust entirely and prepare a Restatement of your trust. Either way, it is important to be sure you follow the rules in your state so the amendment or restatement is considered valid.
An amendment is usually sufficient to make changes when you get married or have a new child that needs to be added as a beneficiary of your trust. If, however, you need to make extensive revisions, revocation may be better. You can start over and make sure the terms are accurate and not confusing.
If you have questions regarding funding trusts, or any other estate planning needs, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.
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