Assets That Can and Cannot Go Into Revocable Trusts in New York
At Morgan Legal Group, located in New York City, we specialize in estate planning, probate, guardianship, elder law, wills, and trusts. One of the most effective tools in estate planning is the revocable trust, also known as a living trust. This guide will detail which assets can and cannot be placed into a revocable trust to ensure your estate plan is both effective and comprehensive. Understanding the nuances of asset placement is crucial for maximizing the benefits of a revocable trust.
What is a Revocable Trust?
A revocable trust is a legal document that allows you to manage and protect your assets during your lifetime and specify how they should be distributed after your death. Unlike an irrevocable trust, a revocable trust can be altered or revoked at any time by the grantor (the person who creates the trust). This flexibility makes revocable trusts a popular choice for estate planning.
Benefits of a Revocable Trust
Before diving into the specifics of asset placement, it is important to understand the key benefits of a revocable trust:
Avoiding Probate
Assets placed in a revocable trust can bypass the probate process, allowing for quicker and more private distribution to beneficiaries.
Management During Incapacity
If the grantor becomes incapacitated, a successor trustee can manage the trust assets, ensuring continuous financial management.
Flexibility
The grantor retains control over the trust and can make changes as needed, including adding or removing assets and changing beneficiaries.
Assets That Can Go Into a Revocable Trust
Many types of assets can be placed into a revocable trust. Here are some common examples:
1. Real Estate
Placing real estate into a revocable trust is common practice. This includes your primary residence, vacation homes, and investment properties. Transferring real estate to the trust helps avoid probate and ensures seamless management if you become incapacitated.
2. Bank Accounts
Checking, savings, and money market accounts can be placed into a revocable trust. This allows the successor trustee to manage these accounts without needing a court order.
3. Investment Accounts
Non-retirement investment accounts, such as brokerage accounts and mutual funds, can be transferred to a revocable trust. This ensures that these assets are managed according to your wishes and bypass probate.
4. Stocks and Bonds
Individual stocks and bonds can be retitled in the name of the trust. This allows for easier management and distribution of these assets upon your death.
5. Personal Property
Valuable personal property, such as jewelry, art, antiques, and collectibles, can be included in a revocable trust. Including these items helps avoid probate and ensures they are distributed according to your wishes.
6. Business Interests
If you own a business, placing your ownership interests in a revocable trust can provide for smooth management and transition in the event of your incapacity or death. This includes interests in partnerships, LLCs, and closely held corporations.
Assets That Cannot or Should Not Go Into a Revocable Trust
While many assets can be placed into a revocable trust, there are certain assets that cannot or should not be included. Here are some examples:
1. Retirement Accounts
Retirement accounts, such as IRAs, 401(k)s, and 403(b)s, cannot be retitled in the name of a revocable trust without triggering significant tax consequences. Instead, you can name the trust as a beneficiary of these accounts, allowing the funds to be managed according to your trust’s terms after your death.
2. Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs)
Similar to retirement accounts, HSAs and MSAs cannot be transferred to a revocable trust. You should name a beneficiary for these accounts to ensure they are managed according to your wishes after your death.
3. Life Insurance Policies
While life insurance policies can technically be placed in a revocable trust, it is often more beneficial to name the trust as the beneficiary. This allows the proceeds to be managed according to the trust’s terms without subjecting the policy to probate.
4. Vehicles
Vehicles can be included in a revocable trust, but it is not always practical. In New York, transferring vehicle ownership to a trust can be complicated and may not provide significant benefits. Instead, consider naming a transfer-on-death (TOD) beneficiary for your vehicles.
5. Annuities
Annuities often have restrictions on transfers, and moving them into a revocable trust can result in penalties or tax consequences. As with retirement accounts, it is usually better to name the trust as the beneficiary of the annuity.
Steps to Transfer Assets to a Revocable Trust
Transferring assets to a revocable trust involves several steps. Here’s how to do it:
1. Create the Trust Document
Work with an experienced estate planning attorney to draft the trust document. This legal document outlines the terms of the trust, including how assets will be managed and distributed.
2. Change Titles and Ownership
For assets like real estate and bank accounts, you will need to retitle them in the name of the trust. This involves changing the ownership documents to reflect the trust as the new owner.
3. Update Beneficiary Designations
For retirement accounts, life insurance policies, and annuities, update the beneficiary designations to name the trust as the beneficiary. This ensures that these assets are managed according to the trust’s terms after your death.
4. Transfer Personal Property
For personal property, you may need to create an assignment of ownership document that transfers these items to the trust. This document should be kept with your trust records.
5. Notify Financial Institutions
Inform your financial institutions of the trust and provide them with a copy of the trust document. They may have specific requirements for transferring accounts to the trust.
How Morgan Legal Group Can Help
At Morgan Legal Group, we have extensive experience in creating and managing revocable trusts. Here’s how we can assist you:
Personalized Legal Advice
We provide personalized legal advice tailored to your unique situation and goals. Our attorneys will help you understand the benefits and requirements of a revocable trust.
Drafting and Reviewing Trust Documents
Our attorneys can draft and review your trust documents to ensure they comply with New York State law and meet your specific needs.
Ongoing Support and Guidance
We offer ongoing support to help you manage and administer the trust effectively. Our team is here to answer your questions and provide guidance as needed.
Conclusion
Understanding which assets can and cannot go into a revocable trust is essential for effective estate planning. At Morgan Legal Group, we are dedicated to helping you navigate the complexities of estate planning and providing the best possible legal services. Contact us today to schedule a consultation with an experienced estate planning attorney and ensure that your revocable trust meets your needs in New York.
Frequently Asked Questions
What is a revocable trust?
A revocable trust is a legal document that allows you to manage and protect your assets during your lifetime and specify how they should be distributed after your death. It can be altered or revoked at any time by the grantor.
What assets can be placed in a revocable trust?
Assets that can be placed in a revocable trust include real estate, bank accounts, investment accounts, stocks and bonds, personal property, and business interests.
What assets should not be placed in a revocable trust?
Assets that should not be placed in a revocable trust include retirement accounts, HSAs and MSAs, life insurance policies, vehicles, and annuities.
Why should I use a revocable trust?
A revocable trust helps avoid probate, allows for management during incapacity, and provides flexibility in managing and distributing your assets.
How can Morgan Legal Group assist with revocable trusts?
Morgan Legal Group provides personalized legal advice, drafts and reviews trust documents, and offers ongoing support to ensure your revocable trust is managed effectively and complies with New York State law.
