Not Everything Belongs in the Trust
Once people sign a revocable trust, they often want to put everything into it. That makes sense. We spend time explaining that a trust needs to be funded to do its job, so the natural reaction is to gather every account statement and start changing names. But funding a trust takes more thought than that. Some assets belong in the trust during your lifetime, while others need to stay in your name and connect to your estate plan through beneficiary designations.
Retirement Accounts Stay in Your Name
Your IRA and 401(k) are the big ones. You generally cannot change the ownership of your retirement account to your revocable living trust. The accounts belong to you as an individual and the law doesn’t provide any other option. A properly handled rollover between retirement accounts is something entirely different. When someone says, “Put your accounts into your trust,” they should not be telling you to empty your IRA into the trust’s checking account. The IRS’s IRA guidance explains the rules governing retirement account contributions and transfers.
Naming a Trust as Beneficiary Is a Separate Decision
Naming a trust as the beneficiary of a retirement account is a separate decision. That may make sense when you want oversight or protection for the person inheriting the money, but it needs to be coordinated with the retirement account’s distribution rules. The language in the trust matters, as does the identity of the beneficiaries. We would not automatically name the trust on every retirement account, and we would not automatically rule it out. We need to know what you are trying to accomplish before making that recommendation. The IRS’s inherited IRA guidance addresses the special rules that apply when a trust is named.
Life Insurance: Ownership vs. Beneficiary
Life insurance also requires us to separate ownership from beneficiary designations. You may own the policy personally and name your trust to receive the death benefit. That can allow the proceeds to be managed under the instructions you created for your children. Changing who owns the policy is another matter, with different consequences. A revocable living trust and an irrevocable life insurance trust serve different purposes, even though both have the word “trust” in their names. We want the policy to support your plan without creating an ownership arrangement you never needed.
Review Annuities Before Changing Anything
Annuities deserve a review before anyone submits a change form. The owner, annuitant, and beneficiary can be different people, and changing one does not necessarily accomplish the same thing as changing another. The contract and tax treatment need to be considered together. Some trust arrangements can work with an annuity, but “I have a trust now” is not enough information to decide what should happen. Bring us the actual contract or current statement so we can coordinate with your tax professional and the insurance company before anything changes.
Assets That Aren’t Yours to Fund
You also cannot treat assets belonging to someone else as though they are yours to fund. A custodial account established for your child belongs to your child, even if you are the adult managing it. Jointly owned property requires a look at the other owner’s rights. Business interests may be appropriate trust assets, but an operating agreement or shareholder agreement may restrict transfers. Having authority to manage something does not necessarily give you authority to move it into your personal estate plan.
What Usually Does Belong in the Trust
Ordinary bank accounts, taxable brokerage accounts, and real estate are often appropriate assets for a revocable trust. That does not mean every account must be handled identically. We consider how you use the asset, what happens if you become incapacitated, and how it should pass after your death. Leaving an account outside the trust may be intentional, but there should be a reason and a plan for it. Forgetting about the account is not the same as deciding to leave it out.
Bring the Records to a Funding Review
When we review funding, we want the statements, deeds, and beneficiary records alongside the trust. That lets us see whether the documents and the assets actually work together. Your financial advisor can help carry out account changes, and your accountant can help evaluate tax consequences, while we address the estate planning structure. You should leave that process knowing which assets are moving, which are staying where they are, and how each one will reach the people you intend.
Start with a free 15-minute consult call with Nicole Ott, our Lead Intake Coordinator. Tell her whether your trust has been funded yet and which accounts you are unsure about. That is usually enough for us to say what to do next.
