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Are There Assets You Cannot (or Should Not) Put Into a Revocable Trust?


A living trust allows you to keep certain assets out of the Florida probate process after you die. But there are certain assets that, for one reason or another, cannot or should not be placed into a living trust. Here are some examples.

  1. Retirement Accounts

If you have a 401(k), 403(b), IRA, or qualified annuity for your retirement, the ownership of these assets cannot be transferred or assigned to a living trust. The main reason for this is that while most assets are governed by state law, retirement accounts are subject to strict federal regulations. And federal law assumes these accounts are owned by individuals, not trusts. In addition, if you were to assign a qualified retirement account to a trust, the IRS could consider it a “withdrawal” from your account, meaning you would face certain tax penalties.

So while you should not transfer ownership of a retirement account to a trust, you can name the trust as the primary or contingent beneficiary to receive any funds after you die.

  1. Life Insurance

The whole point of life insurance is to ensure that your family has sufficient funds to meet their expenses after you die. While you can put a life insurance policy in a revocable trust, it is generally speaking not a good idea. There are a couple of reasons. First, your creditors can still seek to collect any money you owe them from assets in your revocable trust, including a life insurance policy. Second, in a revocable trust the policy would still count as your asset for federal estate tax purposes.

If you want to add a measure of protection for your family, you should consider creating an irrevocable life insurance trust. This is just what it sounds like: A trust you cannot amend or revoke once it is established. By placing an insurance policy into an irrevocable trust, it is no longer considered your asset at all.

  1. Motor Vehicles

Technically, there is no reason you cannot place your car, truck, or other motor vehicle into a revocable trust. But that does not mean it is a good idea. For one thing, many insurance companies will make things harder for you if you try and re-title an insured vehicle in the name of a trust. And for another, if a vehicle owned by the trust is involved in an accident, an injured party looking to sue can take legal action against the trust.

Also keep in mind that in Florida, the heirs or beneficiaries of a deceased individual can transfer title to a motor vehicle without the need for formal probate. Instead, the heir or beneficiary can apply directly for a new certificate of title by filing an affidavit and presenting a copy of the deceased owner’s will.

Speak with a Lee County, Florida Estate Planning Attorney Today

These are just a few examples of assets that are not well suited for a revocable trust. If you have additional questions about trusts, and what property you should or should not put in them, contact the Kuhn Law Firm, P.A., at 239-333-4529 today to speak with an experienced Fort Myers estate planning lawyer.

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