When you create a Trust you are creating a separate legal entity that can own property. And by owning property, the terms of the Trust control how that property is distributed after your death. Property owned and distributed by a Trust is a “non-probate” asset. For most of our clients, passing their estates to beneficiaries outside of probate is one of the primary goals of using a Trust.
A Revocable Trust or Living Trust is the most common type of trust used for estate planning. A Revocable Trust can own almost any type of property or asset that you can. The most notable exception is retirement accounts. The owner of a retirement account cannot transfer ownership of the account to a Trust during their lifetime. Our clients’ Trusts are most typically funded with real property like their home and non-retirement accounts like checking, savings, and brokerage accounts.
There are advantages and disadvantages to your Trust owning specific assets. We help our clients evaluate their options for their specific assets when they create a Trust. Some clients choose to leave certain assets in their name, outside of the Trust. If one of their goals is to avoid probate, we make sure they plan to designate payable on-death (POD) beneficiaries or joint owners so those assets will pass outside of probate.