Attorney Thomas B. Burton answers the following question:
"What Assets Should Be Placed in a Revocable Trust?" Attorney Burton explains why a revocable trust is a great estate planning tool for almost all assets, but there are a few exceptions you should discuss when meeting with your attorney, such as tax deferred retirement plan assets.
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I am Attorney Thomas Burton and today's question is the following:
“What Assets Should Be Placed in a Revocable Trust?”
Great question.
Let's start from the top, a revocable trust is what we often use as what we call a ‘Will Substitute’ and our goal is to avoid probate upon all assets, upon your death. So when I put a trust together, I like to use it as the main vehicle for all assets to flow through, instead of flowing through the Probate Court, where they incur probate court fees, time delay and expense.
Basically, any type of asset you own, can be placed inside the revocable living trust. The only asset we generally do not place inside the trust is a ‘Qualified Retirement Plan Asset’ such as a 401k or IRA. Instead, the best method is to leave this first to a living person. So if you're married to a spouse or child and then we can name the trust as a contingent beneficiary upon death but it can cause tax problems by retitling the account because an individual retirement account needs to be in your individual name. So do not worry. It's no trouble. It's just that, these are assets we wouldn't retitle during your lifetime. We would just, if we use the trust for them, we would fund it at death.
However, you can pass these assets outside of probate through the beneficiary designations.
Now, examples of items that should be placed in the trust and our great candidate number one is, real estate. Real estate almost always has to go through probate if it's not placed in a trust because in the state of Wisconsin, the limit, the small estate limit is $50,000 and for a lot of people, if they have a home, they are above that limit, the value of their real estate. Now some is below. I understand that but for the vast majority of real estate, it pulls you into a probate.
Another asset to place in the trust is personal property. Everything lying around your home, tables, chairs, antiques, jewelry, purse, we can put in the trust simply by executing an assignment of trust and this is great for many clients because when you go through a probate, often the most time consuming part, one of the most time-consuming, is when the personal representative has to go through the house instead and list it all on paper to submit to the Probate Court, every rake, every shovel, every sprinkler, every hose. Instead of doing all that, we can assign It all to the trust and avoid probate.
Another great thing you can put in the trust is brokerage accounts and financial accounts. You can simply retitle them and this provides, they will get to your beneficiaries after death and it can also provide your trustee with access to manage those assets in the event you're ever incapacitated.
So those are assets I commonly see placed in a revocable trust but that list is not exhaustive. There's more you can put in but basically almost any type of asset we can put inside the revocable living trust either during life or after your death, to avoid probate upon your death.
So great question and thank you for asking.
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