What Assets Should Stay Out of Your Trust?

Introduction

This tutorial outlines the assets that should generally be kept out of your trust, as explained by attorney Bill O’Leary. Understanding which assets to exclude can help protect your estate and ensure that your legacy is preserved in the way you intend. This guide is particularly relevant for anyone involved in estate planning, elder law, or probate matters.

Step 1: Identify Non-Transferable Assets

Some assets are not suitable for inclusion in a trust. Consider the following:

• Retirement Accounts:
  • Assets like 401(k)s and IRAs should typically remain outside of a trust to maintain their tax-deferred status.
• Life Insurance Policies:
  • Keeping these outside of a trust can ensure that beneficiaries receive the funds directly without complications.
• Personal Property:
  • Items such as vehicles, collectibles, and jewelry may not need to be transferred, especially if they are not intended for distribution through the trust.

Practical Advice

• Review your asset list and consult with a legal advisor regarding the implications of transferring each asset into a trust.

Step 2: Understand Asset Protection

Certain assets may be better protected when kept outside of a trust due to potential risks, including:

• Liability Protection:
  • Business assets or properties may face lawsuits, and keeping them outside of a trust can help shield them from claims against the trust.
• Government Benefits:
  • For individuals receiving Medicaid or other government benefits, certain assets need to be excluded to maintain eligibility.

Practical Advice

• Assess your financial situation and consider how keeping assets outside of the trust may impact your benefits or liability.

Step 3: Evaluate Potential Risks

Including certain assets in your trust could lead to complications. Be aware of these risks:

• Tax Implications:
  • Some assets can trigger tax liabilities if placed in a trust.
• Administrative Issues:
  • Trusts require ongoing management and may complicate asset transfers or sales if not structured properly.

Practical Advice

• Consult with a tax professional to understand the implications of transferring various assets into a trust.

Conclusion

In conclusion, it is essential to carefully evaluate which assets to keep out of your trust to protect your legacy and ensure efficient estate management. By identifying non-transferable assets, understanding asset protection, and evaluating potential risks, you can make informed decisions about your estate planning. For further assistance, consider scheduling a consultation with a legal expert in estate planning.