A revocable living trust is an estate planning document that allows its trustee to actively control many properties and possessions during an entire lifetime. Both new and older possessions can be freely moved in and out of this trust and left to various beneficiaries. Once the trustee passes away, all the property still held by the trust can immediately pass to the beneficiaries and avoid incurring unnecessary probate fees.
Since real estate, business interests and personal possessions can be quite varied, it’s wise to discuss their individual characteristics with your lawyer before placing them in this type of trust. This especially holds true if you plan on buying and selling some of your possessions on a regular basis. In some cases, it may be easiest to allow a few less expensive properties to pass through probate when their value will help minimize any fees.
Here’s an overview of the type of personal possessions, real estate, business accounts and other items that you may want to place in your revocable living trust (RLT).
Types of property often placed in a revocable living trust
- Real estate and houses. You can place these in a revocable trust, even if they’re encumbered by mortgages. Of course, any debt still owing on the property will pass to the beneficiary;
- Legal interests you own in most small businesses. You’ll need to give this very careful thought since you’ll want to be sure your beneficiaries can capably run the business and handle other required tasks. Also, you and your Houston estate planning attorney need to carefully read all the small print in your business contracts to be sure they don’t specifically forbid the transfer of your ownership interests into a trust. Other formalities may also become pertinent. For example, if you’re a partner in a group governed by a partnership ownership certificate, that document may have to be changed to indicate your trust is the legal owner of your share in the business. Somewhat similar issues may arise if you own shares in certain types of corporations;
- Stocks, bonds, bank and security accounts. While it can prove useful (if allowed by the terms of each account) to place all of these in your revocable living trust, it may be simpler to just a name a TOD (transfer on death) beneficiary for one or more of these accounts. Ownership can then pass directly to your beneficiaries as soon as they produce legal proof of your death;
- Copyrights, trademarks, royalties and patents. These can all be placed in your LRT (living revocable trust). After you pass away, the rights – and limitations – that governed these interests will pass on to your beneficiaries;
- Gold, silver and other precious metals. Before deciding whether it’s wise to place these in your trust, be sure to get them accurately appraised;
- Prized pieces of artwork, antiques (and less expensive) furniture. Be sure that all these unique items are properly insured before placing them in your trust;
- Your collectibles. These often include coins, stamps and other unique items you may have spent a lifetime collecting. (Be sure all these items are also properly appraised and insured).
Should you place your life insurance policy into your revocable trust?
If you’re considering this move because you’re trying to protect the policy proceeds from having to go through probate, be aware that such proceeds automatically bypass probate and go straight to your named beneficiaries. However, if the only beneficiary of your policy may still be a child should you suddenly pass away, you may want to put the life insurance policy into your trust and name the living trust as the beneficiary. Your lawyer can then make sure that the trust names an adult to manage the proceeds of the life insurance policy for the specifically named child until s/he reaches adulthood.
How should 401(k), 403(b), IRA and qualified annuity accounts be handled?
You can create various tax problems for yourself by trying to transfer these into your LRT. Ask your lawyer if it would be better to just change the beneficiaries named for these accounts.
Should you place ownership of any vehicles in your trust?
If you use them regularly, this is often not practical. However, if you own one or more antique autos, you may want to talk with your attorney about whether it’s fully beneficial to hold title to them in your trust – or if there’s a better way to keep them out of the probate process.
Can oil and gas mineral rights be placed in a revocable living trust?
What you can do with these depends on the precise nature of the rights you hold. Ask your Houston business law attorney if you should create an assignment to these rights or try to formally obtain a new deed before transferring them into your revocable living trust.
Please contact us and allow one of our Murray Lobb attorneys to help you draw up any living revocable trusts you may need to help protect your personal property and possessions.