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What can’t trusts do?

On Behalf of | Oct 18, 2019 | Trusts |

Trusts are good addition to most estate plans. Not only can they help you avoid probate, they also allow you to disperse assets according to certain rules and conditions. However, some assets shouldn’t be placed in a trust, according to The Balance. Using a trust effectively offers the greatest benefit to your heirs, as well as your estate. 

If you have a vehicle you plan on leaving to an heir after you die, you may think re-titling it to show ownership by the trust is your best option. However, depending on where you live you may be subject to a hefty transfer tax when doing so. This is because re-titling vehicles are actually considered a type of sale, so you would be subject to the same type of tax. As an alternative, look into state laws to determine whether you can change the beneficiary designation on the title to establish the trust as a recipient. You may also be able to purchase a new vehicle in the name of the trust. 

Certain accounts, such as uniform transfers, can be used to provide gifts to minors. These accounts stipulate that the child named on the account is the sole owner. As a result, the person who opened the account or the account’s custodian can’t transfer it over to the trust. These accounts do have beneficiary designations, however, which means you can name the trust as a beneficiary in the event of your untimely passing. 

Retirement accounts, including 401(k)s and IRAs, also allow for beneficiary designations. Once again, these should be filled in with the trust information to ensure they’re included. When you change ownership of the account to the trust, the funds would be withdrawn from the account and taxed for the full amount.