Ever wonder about the best ways to protect your family's inheritance in Georgia? A revocable trust can be one option, but certain items don't match well inside that trust.

At Peach State Wills and Trusts^©, we approach estate planning with clarity and help you make practical decisions. Today, we'll explore which assets should remain outside a revocable trust so that everything stays on the right track for you and your loved ones.

Assets Typically Not Suitable for a Revocable Trust

When placing property into a revocable trust, we want to check whether each item is a good fit for your plan. Some holdings are best managed outside the trust's structure. Here are categories of property that often remain separate from a revocable trust.

Qualified Retirement Accounts

401(k)s, IRAs, and other qualified plans that carry tax advantages generally must stay in the wage earner's name during that person's life, and therefore are not transferred to a revocable trust during the grantor's lifetime.  Further, these qualified plans or accounts typically pay out to named beneficiaries directly, bypassing probate. Whether to make the trust a beneficiary is going to depend on your particular goals and the needs of your loved ones.  Tax consequences can accrue if you name the trust as the beneficiary and don't have appropriate provisions in your trust to deal with retirement accounts in a tax favorable manner.

Before making changes to your beneficiary forms, consider consulting trusted legal guidance. Beneficiary choices are a big deal in your estate plan, so it helps to coordinate them with any wills or trusts you already have.

Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs)

Like retirement funds, HSAs and MSAs transfer directly to named beneficiaries. Placing these tax-advantaged accounts into a trust can disrupt their tax treatment. Instead, you can name individuals as beneficiaries or use a payable-upon-death (POD) form.

Always verify that the listed beneficiaries for these accounts reflect your present wishes. You might also set payable-upon-death instructions to keep matters simple if you pass away.

Assets Held Outside the United States

Property located in another country may face distinct government rules and regulations. Trying to fit foreign real estate or bank accounts into a revocable trust can create administrative problems. It's safer to talk to an advisor who understands international exclusions so that your trust remains compatible with all applicable laws. Remember, for assets in other countries, the laws of that country generally control how those are passed on after your death, and what taxes, restrictions, etc. may apply.

Payable-on-Death (POD) or “In Trust For” Accounts

Certain bank accounts are already set to pass assets directly to named beneficiaries. Examples include POD and “in trust for” accounts, also called Totten Trusts. Because they skip probate on their own, there's usually no need to retitle them in your revocable trust if the only reason for possibly including them in the trust is to avoid probate.  Depending on your specific goals, in some cases it may make sense to revise the title to those accounts and add them to your trust. 

Vehicles

Transferring vehicles into a trust can bring potential hassles with lenders or insurance companies. Before adding a car or truck to the trust, loan conditions may require paying off the obligation in full. Also, insurance providers sometimes hesitate to insure a vehicle held under a trust, leading to higher premiums or extra paperwork. In Georgia, it is often very easy to transfer a car title outside of probate with the tag office after the owner has died.

Below is a quick reference showing various asset types and the downsides of placing them in a revocable trust.

Assets That Can Be Placed in a Revocable Trust

Moving on from the items best left out of the trust, let's explore which holdings often work better when held by a revocable trust. Below are categories that many individuals include under the trust's umbrella for more efficient oversight.

Examples of property that often go into a trust include:

●        Real estate you prefer to hold under trust ownership. Make sure the deed is properly transferred and recorded in county land records.

●        Bank accounts, stocks, or bonds can be retitled for simpler estate management.

●        Tangible personal property, such as jewelry, artwork, or collectibles, so that items pass seamlessly.

●        LLCs, where you assign your membership interests to the trust, subject to the LLC's rules.

●        Insurance policies so that the trust can oversee proceeds for your beneficiaries.

The Importance of a Pour-Over Will

A revocable trust is typically part of a broader plan, one that also uses a pour-over will. This type of will names a guardian for minor children and catches any items not moved into the trust before death. That way, if any belongings remain outside the trust, the will directs them to flow back into it, making sure no assets slip through the cracks.

By including a pour-over will, you also revoke previous wills that might conflict with your latest directives. The overall result is one cohesive set of instructions, preventing confusion for those left behind.

Take the Next Step: Contact Peach State Wills and Trusts© Today

At Peach State Wills and Trusts^©, our team strives to provide Georgians with legal support that matches their personal needs. Our focus is on making your plan secure and workable so you and your family are well-covered. If you'd like to discuss your situation or have questions, call us at 678-344-5342 or visit our contact page to schedule a time to talk. Also, you can download our free guide to estate planning in Georgia HERE, no strings attached. Taking that next step can bring greater clarity and help you protect what matters most.