Assets That Can And Cannot Go Into Revocable Trusts in New York

When creating a revocable trust, it's important to know that not all assets should be included. Many assets can go into a revocable trust to help with estate planning goals, like avoiding probate and keeping things private. However, some assets are better not retitled as trust property. These assets might have special tax rules or transfer limitations that don't work well with a revocable trust. Also, certain assets may already avoid probate or have tax advantages on their own, which would be lost if put into a revocable trust. Knowing which assets shouldn't go into a revocable trust is key to making sure the estate plan works well and doesn't cause any problems.

Assets Commonly Placed in Revocable Trusts

Assets commonly placed in revocable trusts include real estate such as primary residences, vacation homes, rental properties, commercial properties, and undeveloped land. Bank accounts, including checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs), are also frequently placed in revocable trusts. Investment accounts, such as brokerage accounts, mutual fund accounts, stock portfolios, and bond portfolios, are another category of assets that can be held in revocable trusts. Personal property, including jewelry, artwork, collectibles, and furniture and household items, can also be placed in revocable trusts.

Assets Generally Not Placed in Revocable Trusts

IRAs, 401(k)s, and 403(b)s are types of retirement accounts that have special tax rules. These accounts can't be put into a revocable trust without causing big tax problems. The better option is to name the trust as the beneficiary of the retirement account. That way, after you pass away, the money in the account will be handled based on what your trust says.

For Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs), it's similar to retirement accounts where it's better to choose a beneficiary or designate the trust as the beneficiary for these accounts. This ensures that after you're gone, the accounts will be taken care of according to your wishes.

Technically, you can put a life insurance policy into a revocable trust. However, it's usually a better idea to name the trust as the beneficiary of the policy. This lets the trust control the life insurance money after your death based on the trust's instructions, and the policy doesn't have to go through probate. Placing life insurance policies into irrevocable trusts (ILITs), however, are a common practice.

Annuities usually have rules that limit transfers, and putting an annuity into a revocable trust can lead to penalties or tax issues. Like with retirement accounts, it's generally better to name the trust as the beneficiary of the annuity rather than putting the annuity into the trust.

Consulting with an estate planning attorney like us is crucial when considering a revocable trust. We have the knowledge and experience in creating revocable trusts and other estate planning tools. We can provide personalized advice based on the grantor's unique circumstances, goals, and concerns, and help the grantor understand the legal and tax implications of placing various assets in a revocable trust. Should you need assistance, you can call us at 212-233-1233 or send us an email at [email protected]. We are located in Midtown, Manhattan in New York, NY. We cover Manhattan, Brooklyn, Queens, Bronx, Staten Island, Long Island and Westchester County.