Things You Probably Should Not Place in Your Living Trust
Despite the advantages a Living Trust provides, there are certain types of assets that you may not want to transfer into your Living Trust:
Property that You Frequently Buy or Sell If you don't expect to own certain property at your death, then there's no real reason to transfer this property into your Living Trust. Of course, few people are able to predict with much precision when they'll actually die. But if you're in good health, and you know you're going to sell a particular asset very shortly, there's no need to transfer it into your trust. On the other hand, when you're buying new property (say, a boat), it's typically no more trouble to title it in your name as trustee of your Living Trust.
Automobiles Due to their quick depreciation, most cars ― especially if they're more than a few years old ― are not particularly valuable. If, however, you own a rare or particularly expensive car that you plan to hold on to, it may make sense to transfer it into your Living Trust. But keep in mind that your insurance company may be reluctant to insure a car owned by a trust. Therefore, be sure to check with your insurance agent first before transferring an automobile into your Living Trust.
Income or Principal from another Trust If you're lucky enough to be receiving interest or principal from another person's trust, please know that you cannot place this property in your Living Trust to give to your own beneficiaries. However, you can still give this money to your beneficiaries through a traditional Will.
IRAs, 401(k)s, etc. Technically, such accounts or funds cannot be owned by a trust. But you can still avoid probate on these accounts by pre-registering a beneficiary to directly receive the funds in these accounts when you die.
Checking Accounts Hopefully, you don't carry a large balance in your checking account, so there won't be a significant advantage in transferring this account into your Living Trust. Also, it can sometimes be difficult to cash checks on accounts held in the name of a trustee.
Life Insurance If you own a life insurance policy, the proceeds will go directly to the beneficiaries named in the policy following your death without being probated ―unless your estate is the named beneficiary. Consequently, there's no probate-avoidance benefit to transferring your life insurance policy into your Living Trust (so long as you've named someone other than your estate as the beneficiary). But if you named a minor or young adult as your life insurance beneficiary, you might nonetheless find it desirable to name your Living Trust as the beneficiary instead of the minor. That way, you can name the child as a beneficiary in the trust agreement to receive the insurance proceeds paid into your Living Trust, and you can also use the adult property management method chosen in you trust agreement to hold the life insurance proceeds until the child reaches a suitable age.
Please keep in mind, however, that changing a life insurance beneficiary is something you'll have to do on your own by contacting your life insurance agent. The Weber Law Firm does not provide this service.