Safeguarding Your Assets: A Guide to Assets Suitable and Unsuitable for Revocable Trusts in New York
When planning your estate and seeking to protect your hard-earned assets, revocable trusts are a pivotal element in that overall process for many New York residents. Specifically, they provide great adaptability, confidentiality, and also the ability to bypass probate, all of which can provide significant long-term financial benefits. Therefore, it’s essential to identify which assets you should include or also exclude in your trust, to fully optimize the advantages of a revocable trust while also meeting all of your specific planning goals. At Morgan Legal Group, we assist all of our clients in New York to navigate the often complex aspects of trust planning and ensure that all of their objectives will be achieved as they plan for the future for themselves and their loved ones.
Understanding Revocable Trusts
Before delving into the specifics of asset inclusion, it is important to understand the basic elements of a revocable living trust and what that means for your legal planning strategy. Primarily, a revocable trust, also often referred to as a living trust, is a legal entity you establish during your lifetime to manage your assets and dictate how they should be distributed after you have passed away. Specifically, unlike its irrevocable counterpart, this type of trust allows the grantor (who is the individual establishing the trust) to retain authority over all of the assets during their lifetime and also to amend the terms of the document, or even to dissolve the trust entirely, if they so choose to do so. Thus, this offers a great level of flexibility in how you manage your assets, and how they are transferred to your loved ones, for the future:
- Bypassing Probate: Assets within the trust will avoid the public, and often costly, probate proceedings and will be able to be transferred directly to your loved ones.
- Maintaining Confidentiality: Unlike wills, that become a part of the public record, trusts remain private, and will keep your personal financial information out of the public eye.
- Flexibility and Control: You will maintain control of all of your assets while you are still living, while also having the power to make changes, as needed, over time.
Assets Suited for Inclusion in a Revocable Trust
When determining which assets to place into your revocable trust, you must take a careful look at your overall financial situation, and also at all of your long-term goals, in order to make the right decisions. Specifically, here are a few types of assets that are often included in a revocable trust:
1. Real Estate Holdings
You can transfer real estate property titles into your revocable trust in order to ensure that they do not have to go through probate after you have passed away. Specifically, this includes your primary residence, as well as any vacation homes or any investment properties that you own and that you would like to protect.
Cautionary Note: If properties have mortgages attached, consult with your lender prior to transferring deeds due to potential “due-on-sale” clauses that may be triggered by some lenders when there is a legal change to the ownership of that property.
2. Banking Assets
A wide range of banking assets may also be titled under the name of a revocable trust, and they can also be a beneficial and powerful element of your overall estate plan. Specifically, this may include savings accounts, checking accounts, and also certificates of deposit (CDs), and all of these can also be transferred into a trust:
Suggestion: It is always best to maintain a separate account outside the trust, that is specifically designated for covering your daily expenses, and also to provide for any emergency funds, that you may need, over time.
3. Investment Portfolios
Brokerage accounts, stocks, bonds, and mutual funds, all represent ideal candidates for inclusion in a revocable trust, and they can also provide a great amount of flexibility and control. Specifically, by transferring ownership of these types of investments into a trust, you are then allowing them to be managed according to pre-established terms, that are set forth in the trust documentation.
4. Personal Belongings
Valuables such as jewelry, art collections, antiques, and even vehicles, can often fall under the purview of inclusion in a revocable trust. Specifically, these can be included, provided that they do not have a specific, formal title assigned to them, as often a simple schedule listing them is more than adequate for documentation purposes.
Life Insurance Policy
While life insurance policies are more typically placed in an irrevocable trust for tax benefits, some individuals often opt to name a beneficiary instead, in order to streamline the proceeds distribution process.
Business Interests
Ownership stakes in LLCs, corporations, and partnerships, can also be transferred to a revocable trust, in order to ensure that the continuity of your business will be properly managed, and also that you will avoid any disruptions, in the event of your incapacitation, or after your death.
Assets Not Recommended For Inclusion Within Such Structures
Despite the fact that a wide range of assets can be incorporated into a revocable living trust, some certain categories of assets often remain either unsuitable, or perhaps they are legally restricted from being incorporated into those documents, and which should be handled in an alternate way. Specifically, here are a few types of assets that may not be suitable for a revocable trust:
- Retirement Accounts: Individual retirement plans like IRAs and 401(k)s cannot be directly transferred, without triggering a taxable event, and so these often need to be handled differently, with specific legal instructions for the distribution of those assets.
- Health Savings Accounts (HSAs): Tax advantages are often lost if they are transferred to a trust, and so it is often best to keep HSAs out of a revocable living trust in order to maintain the tax benefits that they may otherwise offer.
Contact Morgan Legal Group Today
For further information on estate planning in New York, you can consult the website of the New York State Bar Association: www.nysba.org.
In conclusion, navigating the complexities of creating a revocable living trust requires an in-depth understanding of the different types of assets that may, or may not, be best to include, within that type of legal document. Specifically, while a wide range of assets can be transferred to a trust, it’s also important to understand the legal limitations and to also make well-informed decisions that fully align with your own financial goals while also seeking professional legal advice when needed for all of your planning needs. Therefore, if you need help determining how to best plan for your future, and also to determine which assets may be right for your revocable living trust, be sure to contact Morgan Legal Group today, to discuss all of your estate planning needs, and to create a financial future that is both protected, and also secure.
