ABA Family Legal Guide

Estate Planning

Trusts and Living Trusts

Setting Up and Maintaining a Trust

Are there any assets I should leave out of my trust?

The special tax treatment given to individual retirement accounts (IRAs) might encourage you to leave them in your name. The fees your state charges to transfer title of a mortgage or other property could make the cost of transfer prohibitive. You might want to hold off on transferring your home to the trust until the mortgage is paid off or one spouse dies. Some people worry about taking the family home out of the husband and wife's names in joint tenancy and putting it into a living trust in the name of one of the spouses. In such cases, a lawyer may suggest putting the living trust in both your names—for example, "The Stephen and Diana Hogg Trust," with both spouses as cotrustees, instead of just one name.

If the trust is in one name only and the other spouse is not a cotrustee or successor trustee, many lawyers recommend leaving some property—for example, a sizable bank account—outside the trust. If you use a bank account, it should be in the names of both spouses so that if one should die, the other will have access to the funds. A word of caution is in order, however. The law in some states will freeze such accounts for a specified period of time after the death of the cosignatory. Consult your lawyer to get the specifics.

Finally, keeping a few assets out of the living trust can help protect against creditors' claims down the line. When your estate contains some property and goes through probate, it triggers the running of the statute of limitations on claims against your entire estate. Creditors are put on notice that you have died and, once the statutory period expires, the estate is safe from most creditors' claims.

The important point: Be sure to go through each of your assets with your lawyer to determine whether it's wise to transfer that asset to the trust.