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What Cannot Be Included in a Living Trust?

Trusts are crucial in estate planning, however, not many people know what exactly they are able to include. When setting up a living trust it’s crucial to understand that not all assets can or should be included. Here are key items and assets that are typically excluded from a living trust:

Retirement Accounts

  • Individual Retirement Accounts (IRAs)
  • 401(k) plans
  • Pension plans
  • Other retirement benefits

These accounts are governed by their own beneficiary designations and are meant to be distributed directly to the named beneficiaries, outside of a trust.

Life Insurance

Life insurance policies are also not placed in a living trust. They have their own beneficiaries and are payable upon death directly to those individuals, bypassing the trust entirely.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs):

Similar to retirement accounts, these are designed with beneficiary designations and are not funded into a trust.

Motor Vehicles

In many states, motor vehicles are often not titled in a trust due to insurance and liability issues. However, this can vary by location and some estate plans may include a provision for vehicles.

Property with Loans or Mortgages

While real estate with a mortgage can be placed in a trust, it can be complicated. Lenders may have a “due on sale” clause that can be triggered if the property is transferred to a trust.

Certain Personal Property

Items without a formal title, like furniture, clothing, and household goods, may not need to be included in a trust and can instead be distributed through a will.

Intangible Items

Items like airline miles or club memberships, which are governed by contractual terms and not by title documents, are typically not transferable into a trust.

Understanding these exclusions is important for the creation of a comprehensive estate plan. It’s also essential to work with an estate planning professional to navigate the complexities of what should and should not be included in a living trust. At GetDynasty we can provide guidance tailored to an individual’s unique financial and personal situation, ensuring that all assets are properly accounted for and that the estate plan follows the legal requirements of the state in which it is established.

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What is a Trust?

A Living Trust is a financial tool that lets you plan, organize, and protect your life. It’s a personal entity that allows you to add assets and plan out your inheritance. Eliminating legal battles, cost, and time spent by your loved ones. 

Think of it like a personal LLC that you put everything you own in. Except it doesn’t protect you from liability like an LLC does, it protects you from probate and conservatorship. 

Probate is the complicated court process (12-18 months) where a judge decides what happens to your assets after you die, become incapacitated, or are “deemed” incapable. Creating a living trust allows your assets to completely circumvent probate and immediately transfer to your loved ones. 

In addition to being able to name heirs (your beneficiaries), a Trust also allows you to assign someone to manage it (your successor trustee). Instead of going through probate, your Successor Trustee takes control of the Trust, handles your affairs, and distributes your assets according to your instructions. The person you select as Successor Trustee should be your most trusted person. Like a best friend or closest family member.

At Dynasty, we believe everyone should have a Living Trust. If you have children, assets, or plan to acquire assets in the future, you should create a Trust. That way when you buy your next home, open a bank or brokerage account, get startup shares, etc. – you can immediately title them in your trust.