What Assets Should Be in a Trust?

Funding a trust means transferring ownership of your assets into it. A trust that exists on paper but holds no assets accomplishes nothing — assets that were never transferred still go through probate. Understanding which assets belong in your trust and which do not is one of the most important steps in estate planning.

Assets That Should Go in Your Trust

Real estate — your primary home, vacation properties, investment properties, and any out-of-state real estate. Real estate held in a trust avoids probate in every state where the property is located. Without trust ownership, out-of-state real estate requires a separate ancillary probate proceeding in each state.

Bank accounts — checking accounts, savings accounts, and money market accounts. Transfer these by changing the account ownership to the trust or by adding the trust as a payable-on-death beneficiary.

Investment and brokerage accounts — non-retirement taxable investment accounts. Contact your brokerage to retitle the account in the name of the trust.

Business interests — membership interests in LLCs, shares in closely held corporations, and limited partnership interests. Placing business interests in the trust ensures continuity of management and avoids probate.

Vehicles — many estate planning attorneys recommend transferring vehicles, particularly boats and recreational vehicles, into the trust for probate avoidance.

Personal property of significant value — artwork, jewelry, antiques, and collectibles. A general assignment of personal property to the trust is a common technique.

Assets That Should Not Go in Your Trust

Retirement accounts — IRAs, 401(k)s, 403(b)s, and other qualified retirement accounts should never be transferred into a trust. Doing so triggers immediate income tax on the entire balance. Instead, name the trust as a contingent beneficiary if desired.

Life insurance — the death benefit passes directly to named beneficiaries and is not a probate asset. An Irrevocable Life Insurance Trust (ILIT) is a separate tool for estate tax planning purposes.

Vehicles used daily — in many states, retitling a car into a trust can complicate insurance. Check with your insurer before transferring.

Health Savings Accounts and 529 plans — these accounts have specific beneficiary designation rules and should not be transferred to a trust.

The Importance of Keeping Your Trust Funded

Many people create a trust but never properly fund it — failing to retitle assets or forgetting to transfer new assets acquired after the trust is created. An unfunded or partially funded trust is one of the most common estate planning mistakes. Assets that remain outside the trust at death still go through probate, defeating the trust's primary purpose.

Review your trust funding at least every 3 years and whenever you acquire a significant new asset.