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5 Items to Leave out of a Revocable Living Trust

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Updated: Oct 4, 2024

Most clients say they don’t want their family to go through the probate process, so they opt for a Trust-based plan. Don’t let the word “Trust” intimidate you. In simplest terms, a Trust is a document that allows you to keep control of your money and property and designate who receives it once you die.


Having a “Revocable Living Trust” means you can change the terms anytime during your lifetime. As the assets aren't considered a part of your estate, they sidestep the probate process.


It also allows you to continue using assets transferred into the Trust, such as a house or money from investments. Still, this Trust's advantages have limits; certain items will only create headaches if held there.


These are five items to leave out of your Trust:


  • Vehicles. Whether it’s an antique car or a small plane, all that’s required to pass it on is a simple written instruction to transfer the title to a beneficiary.


  • Annuities and retirement accounts. A trust can turn non-taxed accounts into taxable ones. If you distribute the entire account to the trust in a lump sum, the trust can be taxed at a higher rate than an individual.  You must consult a financial advisor about the best options for your circumstances.


  • Life insurance. Name your beneficiaries within the policy. Or create an irrevocable life insurance trust (ILIT) to avoid estate taxes.


  • Assets held in other countries. This gets complicated as you may not be able to do it in the first place — and if you can, you'll need to consult an estate attorney licensed in the country where your international assets are located.


  • Checking and savings accounts. If you use these to pay monthly bills, you may face financial complications unless you’re the trustee and granted full control of trust assets. There's a much easier route to take: Keep these accounts out of the trust.

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