Some assets fit neatly inside a trust, while others can cause tax problems or delays if you try to move them there. At Jordan & White, LLC in Massachusetts, we help families protect what matters and set up plans that actually work in everyday life. Our firm has deep roots in the community and a long track record in estate planning, probate, and real estate law.
Today, we are looking at assets that usually should not be placed in a trust, plus better ways to handle them. This article is educational, not legal advice. For guidance on your plan, please talk with a Massachusetts estate planning attorney.
Overview of Trusts and Estate Planning
A trust is a legal arrangement where a trustee holds property for the benefit of named devisees. The trust can hold title to assets, manage them during your life, and pass them on under terms you choose. Many families use a revocable living trust as part of a broader estate planning strategy to keep control now and provide a smooth handoff later.
People often use trusts to avoid probate, keep affairs private, and provide guardrails for young heirs or loved ones with special needs. Trusts can also help with incapacity planning if you want someone to manage assets if you cannot.
Assets That Are Typically Not Suitable for a Trust
Not every account or benefit plays nicely with trust ownership. Some assets lose tax perks if retitled, while others already pass outside of probate through built-in rules.
Qualified Retirement Accounts (IRAs, 401(k)s, etc.)
Moving an IRA or 401(k) into a trust by changing the owner can trigger income taxes right away and possible penalties. Instead, these accounts are usually handled through devisee designations rather than trust ownership.
Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs)
HSAs and MSAs are designed for individual ownership. Retitling them into a trust can disrupt their tax advantages. Keeping them in your name with named devisees is usually the better path.
Certain Life Insurance Policies
Life insurance can interact with trusts in different ways. Many families keep the policy in their own name but name a trust as the devisee. This approach works well when coordinated with a broader estate plan.
Vehicles
Transferring a vehicle into a trust can create complications with lenders and insurers. In Massachusetts, simpler tools are often used instead of trust ownership. If the vehicle becomes part of an estate, it may still be handled through probate, depending on its title.
Social Security Benefits
A trust cannot own Social Security benefits. These benefits are tied to the individual and are subject to federal rules.
Assets Held Outside the United States
Foreign assets bring added complexity. Different legal systems and tax rules can create conflicts when trying to place them into a U.S. trust. These situations often require coordination with legal professionals experienced in cross-border matters.
Certain Bank Accounts (Joint Accounts with Right of Survivorship)
Joint accounts with survivorship rights already pass directly to the surviving owner. Because they avoid probate automatically, they often do not need to be placed into a trust.
Assets That Can Be Placed in a Trust
Many assets do work well inside a trust and are commonly included in a solid estate plan.
- Real estate, including primary homes and rental properties
- Non-retirement bank accounts and investment accounts
- Business interests, such as LLC ownership
- Personal property like jewelry, artwork, or collectibles
Placing these assets into a trust can help streamline administration and reduce the need for probate.
The Importance of Proper Trust Funding
Creating a trust is only the first step. Funding the trust, meaning transferring assets into it, is what makes it effective. Without proper funding, assets may still go through probate, even if a trust exists.
Common funding steps include:
- Recording deeds to transfer real estate into the trust
- Retitling financial accounts
- Updating devisee designations
- Assigning business interests
- Documenting personal property
Regular reviews help ensure your plan stays current and works as intended.
Seek Guidance on Estate Planning
If you have questions about what to move into a trust and what to leave out, reach out to Jordan & White, LLC | Estate Planning & Real Estate Lawyer. We design straightforward plans that reflect your goals and help protect your family.
You can call us at 978-744-2811 or visit our website to get started. Whether you need help with estate planning, going through probate, or handling real estate matters, our team is ready to help.
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