Feb 10, 2025
Lori Gann Morris, CIMA®, AIF®, CeFT®, Co-Founder / Managing Partner
When it comes to putting assets in a trust, it’s important to realize that not everything can or should be allocated to it. Some assets are a perfect match for a trust, while others might create more problems than they solve. Together, let’s go through which assets belong in a trust and which ones should stay out, so you can make smarter choices for your estate planning.
Assets That Should Be in a Trust
Real Estate
Real estate is a solid asset to include in your trust. The main benefit here is that by placing real estate in your trust, you can avoid probate and simplify the transfer of ownership after death. It doesn’t matter if this includes your primary home, a vacation property, or rental properties; having them in a trust ensures that ownership can pass seamlessly to your beneficiaries without the hassle of court involvement. It can also protect properties from potential creditors or disputes, so you don’t have to worry about property-related headaches after you’re gone.
Investment Accounts
Brokerage accounts, stocks, and bonds are typically great additions to a trust because, again, they simplify wealth transfer and help your beneficiaries avoid the probate process. Plus, there can be tax advantages, especially if you’re transferring stocks with appreciated value—potentially allowing your heirs to inherit them at a stepped-up tax basis (a designation that allows these assets to be revalued to the inheritor’s benefit). It’s a smart way to keep things moving smoothly, with fewer delays, so your family can access their inheritance without the extra red tape.
Business Interests
For business owners, putting ownership shares or partnership interests into a trust ensures the business doesn’t skip a beat if something happens to you. It allows your chosen successor(s) or beneficiaries to maintain control, keep things running smoothly, and avoid any unnecessary disruptions or conflicts. Your business might be one of your most valuable assets, so protecting its continuity should be a top priority when creating or adjusting your trust.
Life Insurance Policies
Life insurance policies are often a good fit for trusts because they ensure that the death benefits are distributed exactly how you intend, while minimizing the risk of disputes among beneficiaries. Plus, naming your trust as the beneficiary of the policy can provide tax advantages, including the ability to manage the proceeds in a way that minimizes estate taxes. It’s a smart way to ensure that the people you care about get the maximum benefit from your policy, no matter what. Be aware that some life insurance policies may already have a beneficiary designation, nullifying the need to place it in a trust.
Cash, Bank Accounts, and Other Liquid Assets
Including cash, bank accounts, and other liquid assets in a trust makes it easy to distribute these funds without the need for probate. However, keep in mind that some accounts, like IRAs or 401(k)s, require a different approach, such as naming beneficiaries directly rather than placing them in a trust. More on this below. But for regular bank accounts, savings, or cash reserves, having them in a trust simplifies the process and ensures quick and direct distribution to your loved ones.
Assets That Should NOT Be in a Trust
Retirement Accounts (IRA, 401(k), etc.)
Retirement accounts like IRAs and 401(k)s generally shouldn’t be placed in a trust due to tax complications and required minimum distributions (RMDs). These accounts come with specific rules on how funds must be withdrawn, and placing them in a trust can result in unintended tax consequences for your beneficiaries.
Personal Property and Small Valuables
When it comes to things like jewelry, art, or family heirlooms, placing these items in a trust might seem tempting, but it’s not always necessary. Personal property like this can often be better handled outside the trust, either through a will or even a separate letter of intent. This ensures that the items are distributed according to your wishes without the complications that sometimes come with placing them in a trust. These can include restricted access (causing delays), family conflict, and unnecessary administrative burden and cost.
Vehicles
Vehicles usually don’t need to be placed in a trust because there are simpler ways to transfer ownership. Many states offer a transfer-on-death (TOD) registration for vehicles, which allows you to designate a beneficiary who will automatically inherit the car after your death. This bypasses the need for probate and doesn’t require the extra paperwork that placing the vehicle in a trust would.
Professional Asset Management
Knowing which assets to include in a trust—and which ones to keep out—is crucial for making your estate plan work as smoothly as possible. If you're feeling uncertain or overwhelmed by the complexities, you're not alone. If you’re in the Austin area, reach out to AMG Wealth Advisors today for expert advice in asset management.