If you've created a Revocable Living Trust to plan for mental disability and avoid probate and you think that your estate plan is done once you've signed the trust agreement, it isn't. Why not? Because after your Revocable Living Trust has been signed you'll need to "fund" it with your assets. But not all of your assets can go into your trust. Here's a list of what types of assets can't be retitled into the name of your trust and some types that shouldn't be retitled due to applicable state law.
Qualified retirement accounts.Qualified retirement accounts, including 401(k)s, 403(b)s, IRAs and qualified annuities, should not be retitled into the name of your Revocable Living Trust. Why not? Because if this type of account is retitled into the name of a Revocable Living Trust, then the transfer will be treated as a complete withdrawal of the funds from the account and 100% of the value will be subject to income tax in the year of the transfer. Instead, the primary or secondary beneficiary of the account will need to be changed to your trust - you'll need to check with your estate planning attorney to determine what makes sense in your situation.
Health Savings Accounts and Medical Savings Accounts.HSAs and MSAs can't be retitled into the name of a Revocable Living Trust. Instead, the trust should be designated as the primary or secondary beneficiary of the account. Check with your estate planning attorney to determine what makes sense in your situation.
UTMA and UGMA accounts.For a UTMA or UGMA account established for the benefit of a minor child, the child is deemed to be the owner of the account, not the person who established the account or the custodian. Instead of changing the owner of the account, a successor custodian should be designated to avoid probate of the account if the primary custodian dies before the minor becomes an adult.
Life insurance.While the owner of a life insurance policy can be changed to the Trustee of the insured's Revocable Living Trust without creating any negative income tax consequences, check with your estate planning attorney before doing so because in some states a Revocable Living Trust isn't a protected "individual" for creditor protection purposes.
Cars, Trucks, Boats, Scooters, Airplanes.While in general motor vehicles can be retitled into the name of a Revocable Living Trust, some states view the transfer as a sale and will charge a significant transfer tax for issuing a new title in the name of the trust. If this is the case in your state, wait and purchase your new vehicle in the name of the trust. Aside from this, in some states probate isn't necessary to transfer ownership of a motor vehicle after the owner dies. You'll need to check with your estate planning attorney to understand what makes sense in your state.