01Qualified retirement accounts.
Qualified retirement accounts, including 401(k)s, 403(b)s, IRAs and qualified annuities, should not be retitled in the name of your Revocable Living Trust. Why not? Because if this type of account is retitled in the name of your trust, then the transfer will be treated as a complete withdrawal of the funds from your account and 100% of the value will be subject to income tax in the year of the transfer. Instead, the primary or secondary beneficiary of your account should be changed to your trust. You will need to consult with your estate planning attorney to determine who should be named as your beneficiaries in your particular situation.
02Health Savings Accounts and Medical Savings Accounts.
HSAs and MSAs cannot be retitled in the name of your trust. Instead, the trust should be designated as the primary or secondary beneficiary of these accounts. Check with your estate planning attorney to determine what makes sense in your situation.
03UTMA and UGMA accounts.
For a Uniform Transfers to Minor account (UTMA) or Uniform Gifts to Minor account (UGMA) established for the benefit of a minor child, the child is deemed to be the owner of the account, not the person who established the account or the custodian. Instead of changing the owner of the account, a successor custodian should be designated to avoid probate of the account if the primary custodian dies before the minor becomes an adult.
While the owner of a life insurance policy can be changed to the Trustee of the insured's Revocable Living Trust without creating any negative income tax consequences, check with your estate planning attorney before doing so because in some states a Revocable Living Trust is not a protected "individual" for creditor protection purposes.
05Cars, Trucks, Motorcycles, Boats, Scooters, Airplanes.
While in general motor vehicles can be retitled into your trust, some states view the transfer as a sale and will charge a significant transfer tax for issuing a new title in the name of the trust. If this is the case in your state, then you may want to wait and purchase your new vehicle in the name of the trust. Aside from this, in some states probate is not necessary to transfer ownership of a motor vehicle after the owner dies and a handful of states now allow vehicle owners to designate a beneficiary after death. You will need to check with your estate planning attorney to understand how to avoid probate of your vehicles in your state.
Types of Assets That Can't Go Into a Revocable Trust
Retitling Assets vs. Updating Beneficiaries and Custodians
If you have created a Revocable Living Trust to plan for mental disability and avoid probate and you think that your estate plan is done once you've signed the trust agreement, it isn't. Why not? Because after your Revocable Living Trust has been signed you will need to "fund" it with your assets. But not all of your assets can go into your trust. Here is a list of the types of assets cannot be retitled into the name of your trust and others that should not be retitled due to applicable state law.