Revocable living trusts are a great benefit to almost everyone’s estate plan. However, though you can put most of your assets in a revocable living trust, living trusts are not ideal for all assets that you may want to pass on to your children, family, friends, and relatives. Today, Collins Law is going to help you with what not to put into a revocable living trust.
What Assets Cannot Go Into a Living Trust?
There are a few assets that legally cannot go inside of a living trust. These are triggered because a living trust is handled legally as a separate entity. You can think of a living trust as a benevolent trusted family member that will do exactly as they are told and is not at risk of dying. However, because of this, some things just cannot pass to them.
- HSAs—A health savings account or HSA is something that is tied to yourself and cannot be retitled as someone else. However, you can list your trust as a beneficiary of these accounts.
- MSAs—A medical savings account or MSA works exactly the same as an HSA. They can’t be retitled, but you can list your trust as a beneficiary.
What Shouldn’t You Put in a Living Trust
Much for the same reasons listed above, there are a few things that you legally can put into a living trust, but which would have negative consequences for doing so that generally make it either not worth it or at the very least worthy of reconsidering.
- Motor Vehicles—This one is a little bit of an odd case. It’s totally legal for you to put a vehicle in a trust. This includes everything from a car to an airplane, however, you will have to pay a retitling fee to do so. If it’s important to you that a vehicle is in your trust, then just know that you have to pay that fee. One workaround is to title the vehicle with your trust in the first place upon purchase. Then you only have to pay for titling once.
- Retirement Accounts—You know what happens if you disperse money from a retirement account early. All those taxes come due immediately. If you transfer them to a trust, then it’s the same as dispersing those accounts. However, you can list the trust as a beneficiary.
- Uniform Transfer/Gifts to Minors—uniform transfers to minor accounts or uniform gifts to minor accounts (UTMAs and UGMAs respectively) should not go in trusts as doing so can trigger probate. Instead, the minor child should be the sole owner of the account.
- Life Insurance—Much the same as with a retirement account. Your life insurance will trigger tax consequences. In this case, you also do not want to list a trust as a beneficiary. A revocable living trust is not protected from creditors upon death like a life insurance policy is.
Need Help With Your Wisconsin Estate Plan?
If you need help with your Wisconsin estate plan, then consider utilizing the estate planning services of Collins Law. Located in Wauwatosa, we serve all of Southeastern Wisconsin including the entire Milwaukee metro area. We’d love to work with you!
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